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A loan repayment plan is scheduled to be made as uniform payments of $2,100 each over 4 years. The first repayment is expected to take
A loan repayment plan is scheduled to be made as uniform payments of $2,100 each over 4 years. The first repayment is expected to take place on Oct 1st in the year 2018. Subsequent repayments will take place on Oct 1st in the years 2019, 2020, and 2021. The loan will be taken on Oct 1st this year. (a) Create a cash flow diagram of the loan repayments. (b) What is the maximum amount which can be taken if the loan's interest rate is 5.5% and compounding is annual? (c) If the principal of the loan needed is $5,500 (to be borrowed on Sep 30th this year) and is to be repaid using the same repayment schedule in (a and b), what is the interest rate which the lender (the bank) will be charging in this case? Note that this interest rate may be different from the value given in (b) but for the same repayment plan
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