# Bentley arranged a loan of $64,000 with his bank so that for the first six years, no repayments were required.

## Question:

Bentley arranged a loan of $64,000 with his bank so that for the first six years, no repayments were required. The loan attracted the interest of 6.52% per annum, compounded quarterly.

(a) state a recurrence relation for A_{n, }the loan balance after* n *quarters. At the end of the six-year term, Bentley repaid all the interest that had been added to the loan.

(b) Determine the total interest added to the loan during the first six years.

After Bentley repaid the interest, the loan reverted to a reducing balance loan, with the principal of $64,000 repaid in ten equal quarterly installments. The first repayment was made three months after the end of the initial six-year term.

(c) Determine the amount of each repayment

**Related Book For**

## Financial Reporting Financial Statement Analysis and Valuation a strategic perspective

ISBN: 978-1337614689

9th edition

Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

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**12**- Valuation: Cash-Flow-Based Approaches