Question
A debt of $18,000 is being repaid by 15 equal semi-annual payments. Payments are made at the end of every six months, with the first
A debt of $18,000 is being repaid by 15 equal semi-annual payments. Payments are made at the end of every six months, with the first payment to be made six months from now. Interest is at the rate of 7% compounded semi-annually.
a Calculate the loan outstanding amount after the first 2 years.
b) After the first two years, the interest rate increases to 8% p.a. compounded semiannually. If the debt must be paid off on the original agreed-on term, recalculate the size of the new semi-annual payments.
c) If the first payment is to be made a year from now, recalculate the size of each semiannual payment.
d) If payments are to be made at the beginning of every six months, with the first payment due immediately, recalculate the size of each semi-annual payment.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started