1. As in Example 2.6 in the notes, suppose you have paid five installments and you want to pay off the rest at the time the 6th installment is due. How much you need to pay? (Hint: you need to pay the 6th installment and the discounts of other 4 installments to that time. For example the discount amount of the 7th installment to that time is fr). Example (2.6 Repayment of a Debt) Suppose you have a loan of $10,000, and you plan to payoff the debt in 10 equal annual installments. With the annual compounding rate 15%, how much you need to pay each year? Solution: Suppose each installment is C. Then PA(0.15, 10) * C = 10,000. Since PA(0.15, 10) 1 (1 + 0.15)-10 0.15 = 5.018768626, then 10,000 C= $1992.52. PA(0.15, 10) So you are expected to pay $1992.52 each year for 10 years