Tom wants to re-negotiate his loan with the bank. Currently he is on the hook for 3 equal lump sum payments of $4600. One instalment is owed today, one in 3 years time and the last instalment in 6 years time.

Instead, he would like to have only 1 lump sum repayment in 5 years time. Assume money is worth 5.35% per annum, compounded quarterly.

Determine that single lump sum in 5 years time that will pay off Toms loan.

Is Tom wise to re-negotiate his current loan to a single lump sum repayment? Explain.