1. Amy receives a home improvement loan of $10,000. The loan has a nominal interest rate convertible monthly of i(12) = 6%. The term of the loan is three years and Amy is expected to make level end-of-month payments, except that she is allowed to miss one payment so long as she then pays higher level payments for the remainder of the three years, so as to have repaid the loan at the end of the three-year period. Suppose Amy misses the payment at the end of the eleventh month.

   a) At the end of eleven months, without any payment having been made at that time, what is the outstanding loan balance?

   b) What must the new level payments be?