Question

Jan gives Ted a loan at 4% effective to be repaid by 10 annual payments of 100, followed by 5 annual payments of 200. Just after Ted makes the 5th payment, Jly and Ted discover that each of the 15 payments should have been 10% higher than they were originally scheduled. They agree that Ted will make increased payments of K in the 6th through 10th years to adjust for the error. The payments of 200 in the 11th through 15th years will not change. Determine K.
a. 129
b. 113
c. 145
d. 139
e. 149

Answer 1

Answer:

139 ( D )

Step-by-step explanation:

Interest rate on loan = 4% = 0.04

Number of payments = 15

First 10 payments = 100 each

last 5 payments = 200 each

Calculating the value of K

K = [ ( 100 / 0.04 * ( 1-1 / 1.04^10 ) + 200/0.04 * ( 1-1 / (1 +0.04)^5)*  1 /1.04^10)

*  1.1 - 100 / 0.04 * ( 1-1 / (1+0.04)^5 ) - 200/0.04 * (1-1 /1.04^5) * 1/1.04^10)*0.04 / ( 1-1 / 1.04^5) * (1 + 0.04)^5

= 138.6051 ≈ 139