Question

You have a loan outstanding. It requires making five annual payments of $ 2 comma 000 each at the end of the next five years. Your bank has offered to restructure the loan so that instead of making the five payments as originally​ agreed, you will make only one final payment in five years. If the interest rate on the loan is 4 %​, what final payment will the bank require you to make so that it is indifferent to the two forms of​ payment?

Answer 1

The payment at the end of the five years will be of $10,832.65

Step-by-step explanation:

we will calculate the future value of five-year payment of 2,000 at 4% interest rate:

`C * ((1+r)^(time) )/(rate) = FV\\`

C 2,000

time 5

rate 0.04

`2000 * ((1+0.04)^(5) -1 )/(0.04) = FV\\`

FV $10,832.6451