Question
A person borrows 100,000 to 5% annual interest. The loan must be repaid in accordance with the annuity principle with a fixed annual amount. The
A person borrows 100,000 to 5% annual interest. The loan must be repaid in accordance with the annuity principle with a fixed annual amount. The first amount is paid one year after borrowing, the last amount8 years after borrowing.
a) How large are the annual payments?
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b) Assume that the person has just paid the 4th payment. What is the present value at this point in time of the four remaining payments?
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c) Immediately after the 4th payment, the loan terms are changed so that the rest of the loan is repaid in such large amounts, the first payment in one year. We still have to count on 5% annual interest. How big are the annual payments?
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