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Bob has borrowed $1,000,000 from MQ Bank for 10 years at an interest rate of j 2 =4.78% p.a. She will make 10 annual repayments.

Bob has borrowed $1,000,000 from MQ Bank for 10 years at an interest rate of j2=4.78% p.a. She will make 10 annual repayments. According to the loan agreement, Mary's repayments will be $86,000 for the first two years followed by payments of X per year for the remaining eight years. This loan needs to be fully repaid by the end of 10 years.

(a) Assume that all annual repayments will be paid at the end of each year (the first payment will be at the end of the first year), what is the value of Mary's annual payment amount, X (rounded to four decimal places)?

a.

141352.8918

b.

129069.0371

c.

141857.4805

d.

128750.1991

Bob has borrowed $1,000,000 from MQ Bank for 10 years at an interest rate of j2=4.78% p.a. She will make 10 annual repayments. According to the loan agreement, Mary's repayments will be $86,000 for the first two years followed by payments of X per year for the remaining eight years. This loan needs to be fully repaid by the end of 10 years.

(b) Assume that all annual repayments will be paid at the beginning of each year (the first payment will be at the start of the first year), what is the value of Mary's annual payment amount, X (rounded to four decimal places)?

Question 7Answera.

133672.4444

b.

127574.3887

c.

134062.9645

d.

127877.3808

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