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Financial Mathematics Old FM Forum 

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#1




TIA question
A borrower takes out a loan of 4000 at an annual effective interest rate of 6%. Starting at the end of the fifth year, the loan is repaid by annual payments, each of which equals 600 except for a final payment that is less than 1000. Calculate the final balloon payment.
Why can’t there be 12 payments of 600? The solution is saying it is 11. Is this because if it’s 12 payments of 600 you will have a drop instead of ballon payment? Last edited by Sullinator; 03282019 at 05:35 AM.. 
#5




Quote:
A ballon payment is a final payment larger than the regular payment. So the answer has to be a payment larger than 600. 
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