Scheduled loan payments of $1146 due in 6 months and $1147 due in 15 months are rescheduled as a payment of $774 due in 39 months and a second payment due in 45 months. Determine the size of the second payment if interest is 4 5% compounded quarterly and the focal date is 45 months from now.

Scheduled loan payments of $1146 due in 6 months and $1147 due in 15 months are rescheduled as a payment of $774 due in 39 months and a second payment due in 45 months. Determine the size of the second payment if interest is 4 5% compounded quarterly and the focal date is 45 months from now.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 31P

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

Question

Scheduled loan payments of $1146 due in 6 months and $1147 due in 15 months are rescheduled as a payment of $774 due in 39 months and a second payment due
in 45 months. Determine the size of the second payment if interest is 4 5% compounded quarterly and the focal date is 45 months from now.

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