Billy has just formed his new internet start-up company. To fund operations, the bank agreed to...

 

Transcribed Image Text:

Billy has just formed his new internet start-up company. To fund operations, the bank agreed to lend Billy $1 million. The terms of the loan are that Billy must repay the loan with quarterly instalments over 10 years. Assume an interest rate of ¡(4) = 8%. (a) What are Billy's regular payments? 4. (b) After making 10 payments, Billy discovered that business was not going as well as expected. Consequently, Billy missed the next 5 payments. Today is now the date that 5th missed payment is due. The bank has agreed to refinance the loan under the following terms. Billy must make a onetime payment of $50,000 now. The remaining balance must be paid in 12 equal monthly payments, with the first of these in one month. Also, the bank is changing the interest rate to i(12) = 18%. What is the size of these new payments? Billy has just formed his new internet start-up company. To fund operations, the bank agreed to lend Billy $1 million. The terms of the loan are that Billy must repay the loan with quarterly instalments over 10 years. Assume an interest rate of ¡(4) = 8%. (a) What are Billy's regular payments? 4. (b) After making 10 payments, Billy discovered that business was not going as well as expected. Consequently, Billy missed the next 5 payments. Today is now the date that 5th missed payment is due. The bank has agreed to refinance the loan under the following terms. Billy must make a onetime payment of $50,000 now. The remaining balance must be paid in 12 equal monthly payments, with the first of these in one month. Also, the bank is changing the interest rate to i(12) = 18%. What is the size of these new payments?

Answer rating: 100% (QA)

SOLUTION a To find Billys regular payments we can use the formula for the present value of an annuit... View the full answer