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Old 02-01-2017, 03:36 PM
kevintanen kevintanen is offline
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College: Adelphi University: Alumni
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Default Drop Payments, Sample Interest Theory Problem 106

106.
A company takes out a loan of 15,000,000 at an annual effective discount rate of 5.5%. You are
given:
i) The loan is to be repaid with n annual payments of 1,200,000 plus a drop payment
one year after the nth payment.
ii) The first payment is due three years after the loan is taken out.
Calculate the amount of the drop payment.
(A) 79,100
(B) 176,000
(C) 321,300
(D) 959,500
(E) 1,180,300

In the solutions, before they calculate the accumulated value of the payments, they accumulate the balance to time 2. I was wondering why they didn't go to to time 3, when the first payment is due.
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Old 02-01-2017, 05:16 PM
Academic Actuary Academic Actuary is offline
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So you don't have to switch to bgn mode.
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Old 10-17-2017, 12:32 PM
Acstumpf Acstumpf is offline
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Join Date: May 2017
College: University of Wisconsin Milwaukee
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Quote:
Originally Posted by kevintanen View Post
106.
A company takes out a loan of 15,000,000 at an annual effective discount rate of 5.5%. You are
given:
i) The loan is to be repaid with n annual payments of 1,200,000 plus a drop payment
one year after the nth payment.
ii) The first payment is due three years after the loan is taken out.
Calculate the amount of the drop payment.
(A) 79,100
(B) 176,000
(C) 321,300
(D) 959,500
(E) 1,180,300

In the solutions, before they calculate the accumulated value of the payments, they accumulate the balance to time 2. I was wondering why they didn't go to to time 3, when the first payment is due.
Where do you find the solutions?
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