The properties of the Coachmen Inn secured two loans from the union bank: one for $8000 due in 3 years and one for $15000 due in 6 year, both at an interest rate of 10% compounded semiannually.
The bank allowed the two loans to be consolidated into one loan payable in 5 year at the same interest rate.
How much the business has to pay the bank at the end of 5 year?
Plz help me.......?mortgage loan
The present value of the two loans is given by the amount due / an interest factor based on the years till it%26#039;s due, n, and the interest rate, i: you divide by (1+i)^n
For semiannual; compounding use (1+i/2)^2n
8000/1.05^6 + 15000/1.05^12 = P
This is the %26quot;payoff%26quot; amount if they wanted to pay the balances off now, so presumably this is the total amount of debt that the bank is restructuring.
Accumulate this for 5 years to get the amount due then:
P * 1.05^10 (Just to belabor the point and be abundantly clear: 10 is 5 years times 2 since interest is computed 2 times per year, and .05 is .10/2 to get the rate applied semiannually).
Aren%26#039;t you glad this isn%26#039;t an amortizing loan, with monthly payments?
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