Question

2) Gertrude has borrowed $6000 from her bank to buy a new machine for her business....

2) Gertrude has borrowed $6000 from her bank to buy a new machine for her business. She has promised to make payments of $2000 after two years, $2500 after three years, and a final payment after five years. What is the size of the last payment, if interest is 8% compounded semiannually?

*Please use financial calculator method and show the values being entered for PY, CY, I, N, PMT, FV, PV along with your final answer*

Homework Answers

Answer #1
Present value of 2000
Put in calculator
FV 2000
PMT 0
I 8%/2 4%
N 2*2 4
Compute PV ($1,709.61)
Present value of 2500
Put in calculator
FV 2500
PMT 0
I 8%/2 4%
N 3*2 6
Compute PV ($1,975.79)
Total amount paid = $3,685.39
1709.61+1975.79
Amount left = $1,314.61
5000-3685.39
Future value of pending amount -
put in calculator
PV ($1,314.61)
PMT 0
I 4%
N 5*2 10
Compute FV $1,945.94
ans = $1,945.94
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