A company takes out a loan of 15,000,000 at an annual effective discount rate of 5.5%. you are given: i) the loan is to be repaid with n annual payments of 1,200,000 plus a drop payment one year after the nth payment. ii) the first payment is due three years after the loan is taken out. calculate the amount of the drop payment.

Question

Shane Short

Business

9 August, 15:26

A company takes out a loan of 15,000,000 at an annual effective discount rate of 5.5%. you are given: i) the loan is to be repaid with n annual payments of 1,200,000 plus a drop payment one year after the nth payment. ii) the first payment is due three years after the loan is taken out. calculate the amount of the drop payment.

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Dean Jefferson · Answer 1

Answer: In the solutions, before they calculate the accumulated value of the payments, they accumulate the balance to time 2. I was wondering why they didn't go to to time 3, when the first payment is due.