Answer:
$2,969.22
Explanation:
Equal principal repayment=$2,500/5
Equal principal repayment=$500
The fact that Jeremy's son repaid $517.50 at the end of the 5th year, means that the interest paid in year 5 is the difference between the amount repaid($517.50) and the equal principal repayment($500)
interest paid in year 5=$517.50-$500=$17.50
That also means that the balance outstanding at the beginning of year 5( at the end of year 4) is $500, which effectively means that the interest rate on the loan is the determined thus:
interest paid in year 5=balance at the end of year 4*interest rate
$17.50=$500*interest rate
interest rate=$17.50/$500
interest rate=3.50%
The schedule of repayment is attached
The first repayment would be invested for 4 years, since it is occurring at the end of year 1( in years 2-5), the year 2 repayment would be invested for only 3 years and so on.
FV value of reinvestment of repayment=$587.50*(1+3.50%)^4+$570.00*(1+3.5%)^3+$552.50*(1+3.5%)^2+$535.00*(1+3.5%)^1+$517.50
FV value of reinvestment of repayment=$2,969.22
