Question

Charlie borrowed $192000 today. The interest rate on the loan is j1=5% for the first 5...

Charlie borrowed $192000 today. The interest rate on the loan is j1=5% for the first 5 years, then it changes to j1=7.8% thereafter. To repay the loan, Charlie makes yearly payments of R dollars (in the end of year) from year 3 to year 11. What is R?

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Answer #1
Particulars Amount
Loan amount $      192,000
× FVF        1.102500
Loan balance in year 2 $ 211,680.00
Payment factor Amount
Present value annuity factor
years 6 to 11		        4.651063
× PVF        0.863838
Present value at year 5 4.017762724
Add:
Present value annuity factor
years 3 to 5		      2.7232480
Total factor for annual payments      6.7410108
Loan balance $ 211,680.00
/ Factor total      6.7410108
Each payment       31,401.82

R is $31,401.82

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