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Rachel is the beneficiary of the Crum Trust which will pays her a perpetuity of 10,000 at the beginning of each year forever. Using an
Rachel is the beneficiary of the Crum Trust which will pays her a perpetuity of 10,000 at the beginning of each year forever. Using an annual effective interest rate of i, this perpetuity has a present value of 135,000. Chloe loans 50,000 to Dakota. Dakota will repay the loan with level annual payments of 5000 for n year followed by a smaller payment at the end of n + 1 years. The annual effective interest rate on the loan is i - the same interest rate used to calculate Rachel's present value. Dakota makes the first 4 payments. She then forgets to make the payment at the end of year five, but did make the payments at the end of the sixth, seventh and eighth years. Determine the outstanding loan balance at the end of the eighth year right after Dakota's payment
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