Cal Lury owes $27,000 now. A lender will carry the debt for six more years at...

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Cal Lury owes $27,000 now. A lender will carry the debt for sixmore years at 7 percent interest. That is, in this particular case,the amount owed will go up by 7 percent per year for six years. Thelender then will require that Cal pay off the loan over the next 14years at 10 percent interest.

What will his annual payment be? Use Appendix A and Appendix Dfor an approximate answer, but calculate your final answer usingthe formula and financial calculator methods. (Do not roundintermediate calculations. Round your final answer to 2 decimalplaces.)

  Annual payments $

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4.4 Ratings (787 Votes)

	Each annual payment (P)	PVA÷([1-(1÷(1+r)^n)]÷r)

	Here,

1	Interest rate per annum	10.00%
2	Number of years	14
3	Number of compoundings per per annum	1
1÷3	Interest rate per period ( r)	10.00%
2×3	Number of periods (n)	14
	Present value (PVA)	$ 40,520	27000*(1+7%)^6

	Each annual payment (P)	$ 5,500.40
		40520/((1-(1/(1+10%)^14))/10%)

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Transcribed Image Text

Cal Lury owes $27,000 now. A lender will carry the debt for sixmore years at 7 percent interest. That is, in this particular case,the amount owed will go up by 7 percent per year for six years. Thelender then will require that Cal pay off the loan over the next 14years at 10 percent interest. What will his annual payment be? Use Appendix A and Appendix Dfor an approximate answer, but calculate your final answer usingthe formula and financial calculator methods. (Do not roundintermediate calculations. Round your final answer to 2 decimalplaces.) Annual payments$