A 20-year loan of 150,000 is negotiated with the borrower agreeing to repay principal and interest at...

50.1K

Verified Solution

Question

Finance

A 20-year loan of150,000 is negotiated with the borrower agreeing to repay principaland interest at 5%. A level payment of 9,000 will apply during thefirst ten years and a higher level payment will apply during theremaining ten years. Each time the lender receives a payment fromthe borrower, he will deposit the portion representing theprincipal into a sinking fund with an annual effective interestrate of 4%. (Assume that the interest portion remains levelthroughout these 20 years and assume that all but the interestportion is deposited into the sinking fund.) This scheme willreplace the lender’s capital.
What is the higherpayment (rounded to the nearest dollar) that applies during theyears 11-20?

Answer & Explanation Solved by verified expert

4.5 Ratings (988 Votes)

Interest portion 5 x 150000 7500 Hence principal portion in the first 10 years payment 9000 7500 1500 Let A be the higher payment that applies during See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member