Fred owes $5,000 due in three years and $8,000 due in 11 years. Unfortunately, Fred is unable to meet the $10,000 obligation. By mutual consent with the lender, Fred is allowed to pay off both loans after eight years at 9% simple interest. (eight years is the focal date.) How much does Fred pay?

Fred owes $5,000 due in three years and $8,000 due in 11 years. Unfortunately, Fred is unable to meet the $10,000 obligation. By mutual consent with the lender, Fred is allowed to pay off both loans after eight years at 9% simple interest. (eight years is the focal date.) How much does Fred pay?

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter6: Deductions And Losses: In General

Section: Chapter Questions

Problem 25DQ

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Concept explainers

Loans

A loan is a term that we are all familiar with. The processing of loans is one of the most important functions of a bank. It keeps our economy stable and facilitates the implementation of monetary policies. Let's take a look at the different forms of loans and get some answers to some common questions.

Question

Fred owes $5,000 due in three
years and $8,000 due in 11 years.
Unfortunately, Fred is unable to
meet the $10,000 obligation. By
mutual consent with the lender,
Fred is allowed to pay off both
loans after eight years at 9%
simple interest. (eight years is the
focal date.) How much does Fred
pay?

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