Question

Use tables and cash flow diagram: A mechanical engineering graduate who wanted to have his own business borrowed $350,000 from his father as start-up money. Because he was family, his father charged interest at only 4% per year. If the engineer was able to pay his father $15,000 in year 1, $36,700 in year 2, and amounts increasing by $21,700 each year, how many years did it take for the engineer to repay the loan?

Answer 1

Let us assume it takes n years to repay the loan.

We can determine the number of years using trial and error method.

Assume n= 6 years.

Now,assume rate = 5 years

From above calculation we can see the PW for 5 years is negative while at n= 6 years it is positive. Therefore, number of years will be 6 years.

We can determine the Number of years using linear interpolation.

Number of years to repay loan = 6 years.

Please contact if having any query will be obliged to you for your generous support. Your help mean a lot to me, please help. Thank you.