A person borrows money at (12) = .12 from Bank A, requiring level payments starting one...
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A person borrows money at (12) = .12 from Bank A, requiring level payments starting one month later and continuing for a total of 15 years (180 payments). She is allowed to repay the entire bal- ance outstanding at any time provided she also pays a penalty of k% of the outstanding balance at the time of repayment. At the end of 5 years (just after the 60th payment) the borrower decides to repay the remaining balance, and finances the repayment plus pen- alty with a loan at (12) = .09 from Bank B. The loan from Bank B requires 10 years of level monthly payments beginning one month later. Find the largest value of k that makes her decision to re- finance correct. A person borrows money at (12) = .12 from Bank A, requiring level payments starting one month later and continuing for a total of 15 years (180 payments). She is allowed to repay the entire bal- ance outstanding at any time provided she also pays a penalty of k% of the outstanding balance at the time of repayment. At the end of 5 years (just after the 60th payment) the borrower decides to repay the remaining balance, and finances the repayment plus pen- alty with a loan at (12) = .09 from Bank B. The loan from Bank B requires 10 years of level monthly payments beginning one month later. Find the largest value of k that makes her decision to re- finance correct.
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Answer rating: 100% (QA)
Refinancing Decision and Maximum Penalty We need to compare the total payments over 15 years at Bank A with the total payments for the remaining balan... View the full answer
Related Book For
Contemporary Business Mathematics with Canadian Applications
ISBN: 978-0133052312
10th edition
Authors: S. A. Hummelbrunner, Kelly Halliday, K. Suzanne Coombs
Posted Date:
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