Question: A $ 5 0 0 0 loan at 1 0 % compounded annually is to be repaid by two payments three and five years from

A $

5000

loan at

10 %

compounded annually is to be repaid by two payments three and five years from the date of the loan. The first payment of $

3000

will be applied to the balance owed after conversion of interest to principal at the end of the first three years. What would an investor pay for the loan contract

20

months after the date of the loan if she requires a rate of return of

9 %

compounded monthly?

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