Imagine that you have the following debt obligations.You owe L(1) =

$10,000 at an APR of i (1) = 25%, which will be paid off in equal monthly payments over N(1) = 3 years. You owe L(2) = $16,000 at an APR of i (2) = 19%, which will be paid off in equal monthly payments over N(2) = 5years. Youowe L(3) = $24,000 at anAPRof i (3) = 15%, which will be paid off in equal monthly payments over N(3) = 7 years. You owe L(4) = $10,000 at an APR of i (4) = 8%, which will be paid off in equal monthly payments over N(4) =

13 years. In other words, the total amount of debt that you have outstanding is $60,000. How much more can you borrow – under the same exact payment schedule – if you consolidate your debts into one “basket” in which you are paying a rate of v = 5%? (Note, this is a nominal rate per year.)