John is negotiating a different schedule for payments of his loans: He is to pay 4000$ 17 months from now and 3000$ 21 months from now. His lender has a account with r = 5% John would like to 3000$ now and a single payment 7 mo

John is negotiating a different schedule for payments of his loans: He is to pay 4000$ 17 months from now and 3000$ 21 months from now. His lender has a account with r = 5% John would like to 3000$ now and a single payment 7 mo

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section4.17: Amortized Loans

Problem 1ST

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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.

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3. An exercise on amortization of loans
John is negotiating a different schedule for payments of his loans: He is to pay
4000$ 17 months from now and 3000$ 21 months from now. His lender has an
account with r = 5% John would like to 3000$ now and a single payment 7 month
later. What is that single payment?

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