Question

A person cancels a debt of 10 million in twelve equal installments, payable at the end...

A person cancels a debt of 10 million in twelve equal installments, payable at the end of each month. Find the value of these installments if the applicable rates for the first and second semesters are nominal annual monthly convertible rates of 18% and 27%, respectively.

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Answer #1

Monthly interest rat for 1st semister will be (18%/12) = 1.5%.

Monthly interest rat for 2nd semister will be (27%/12) = 2.25%.

Installments in 2nd semister needs to be discount back for 6 months at interest rate applicable in 1st semister.

The below expression can be used to calculate the installment.

here,

i1 is interest in 1st semister.

i2 is interest in 2nd semister.

Installment amount is 927,902.8409.

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