Renaldo borrows $8,000 from his aunt today to help pay for college expenses. He agrees to repay the loan according to the following schedule, at a rate of 6 percent/year compounded annually.

a. Draw the cash flow diagram from Renaldo’s perspective.

b. Find the value of X such that the loan is fully repaid with the last payment.

c. What is the dollar amount of each of the 4 payments?

Transcribed Image Text:

End of Year 0 1 2 3 4 5 10 6 Cash Flow $8,000 $0 $0 $0 $0 -$X 7 8 ($X+100)-($X+400) -$2X