Reference no: EM132440

Question:

Q. Suppose u borrow rs. 5 lakh 4 ur colege year. The loan wil b paid off over 5 yrs. The loan carries 8% annual i.r and is to be repaid in annual equal instalments over the next 5 yrs . Assume that the money was borrowed at the beginning of ur colege yr and the first instalment wil b due a yr later.

a) compute the amt. of the annual instalment. b) show how the annual instalment plan retires the debt in 5 yrs c) suppose that u wanted to negotiate with bank to defer the first loan installment until the end of year two(but still desire to make 5 equal installments at 8% i.r) . If bank wishes to earn the same profit as in the previous case,what would be the new annual installments amount.