Question

A company plans to finance a site reclamation project that will require a 4 year cleanup period. If the company borrows $4.1 million now, how much will the company have to get at the end of each quarter in order to earn 15% per year, compounded weekly on its investment? calculate the answer using both formula and spreadsheet function? in order to earn 15% per year compounded weekly on its investment at the end of each quarter, the company will have to get...

The answer is 347,076.96, could someone please explain why?

Answer 1

Solution :-

Interest rate per Week = 15% / 52 = 0.2885%

Now Interest Rate per Quarter (r) = ( 1 + 0.002885 )¹³ - 1 = 1.038156 - 1 = 0.038156 = 3.8156%

Now total Quarters in 4 Years (n) = 4 * 4 = 16

Now Present Value (PV ) = $4,100,000

Now Assume Quarterly Payment be X

$4,100,000 = X * PVAF ( 3.8156% , 16 )

$4,100,000 = X * [ 1 - ( 1 + 0.038156 )^-16 ] / 0.038156

X * [ 1 - ( 1 + 0.038156 )^-16 ] = $156,439.60

X * [ 1 - 0.5493 ] = $156,439.60

X = $347,092.42

Therefore Monthly payment = $347,076.96 (Approx )

(ii) Spread sheet Function :-

If there is any doubt please ask in comments

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