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Financial Mathematics Old FM Forum 

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#1




Sample problem
A loan of $50,000 is to be repaid with a series of 15 annual payments beginning two years after the date of the loan. The first five payments (X each) are half as much as the second five payments which are half as much as the final five payments. Interest is calculated at an effective annual rate of 7% for the first six years, and at an effective annual rate of 4% for the last ten years of the loan. Determine X.
I don’t get it, how do you do this? 
#4




You should post FM questions in the FM forum. As thread creator, you can move this one there.
Can you calculate the PV at the moment of loan of the first 5 payments, in terms of X? Of the second 5? Of the third 5? If so, add them up and set equal to 50,000. (That’s “in pieces”, as AG suggested) 
#5




This is best asked in the FM section if you want an explanation of how to do it. Is that what you are asking, or do you have a different question?
Quote:
Add together all of these: Then get the PV of a 5 year annuity at payment X, at a rate of 7%. Then you have the PV of a 10 year annuity at payment 2X with a rate of 4%, discounted 5 years at 7% Then you have a 5 year annuity at payment 2X with a rate of 4% discounted 5 years at 4% and 5 years at 7%. and set them equal to the 53,500. Do algebra and X = 2562 ish. Last edited by Basso; 10152018 at 01:41 PM.. Reason: answering question 
#7




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