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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?

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TomShelby

Answer:

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

Explanation:

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

[tex]C \times \frac{(1+r)^{time} }{rate} = FV\\[/tex]

C 2,000

time 5

rate 0.04

[tex]2000 \times \frac{(1+0.04)^{5} -1 }{0.04} = FV\\[/tex]

FV $10,832.6451

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