QUESTION 8. A borrower takes out a loan of 5,000 at an annual effective interest rate of 1%. Starting at the end of the third year, the loon is repaid by annual payments, each of which equals 500 except for a final balloon payment that is less than 1,000. Calculate the final balloon payment. O 704 O 719 O 884 0903 O 967
QUESTION 8. A borrower takes out a loan of 5,000 at an annual effective interest rate of 1%. Starting at the end of the third year, the loon is repaid by annual payments, each of which equals 500 except for a final balloon payment that is less than 1,000. Calculate the final balloon payment. O 704 O 719 O 884 0903 O 967
Chapter4: Time Value Of Money
Section: Chapter Questions
Problem 14PROB
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Transcribed Image Text:QUESTION 8.
A borrower takes out a loan of 5,000 at an annual effective interest rate of 1%.
Starting at the end of the third year, the loan is repaid by annual payments, each of which equals 500 except for a final balloon payment that is less than
1,000.
Calculate the final balloon payment.
O 704
O 719
O884
O 903
O 967
Transcribed Image Text:Turner buys a new car and finances it with a loan of 11,000.
He will make n monthly payments of 330 starting in one month. He will make one larger payment in n + 1 months to pay off the loan.
Payments are calculated using an annual nominal interest rate of 4.8%, convertible monthly.
Immediately after the 13th payment he refinances the loan to pay off the remaining balance with 8 monthly payments starting one month later. This
refinanced loon uses an annual nominal interest rate of 7.2%, convertible monthly.
Calculate the amount of the new monthly payment.
0644
O 823
0905
923
O 932
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