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Petra is starting a small business, and the bank agrees to offer her the following financing: she can borrow $50000 today and $100000 at the
Petra is starting a small business, and the bank agrees to offer her the following financing: she can borrow $50000 today and $100000 at the end of the first year. She will repay the loan with three payments. The first payment of X will be made at the end of year 3. The next two payments will be at the end of year 4 and the end of year 5, and each one will be double the size of the prior payment (so 2X and 4x). The bank charges 18% compounded 52 times per year. Find X. a) What is the Present Value of the loan at time t = 0? (to 2 decimals) b) What is X? (to 2 decimals)
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