Q) A Company decided to borrow $ 15,000,000 from the bank to purchase a new Air

Question

Q) A Company decided to borrow $ 15,000,000 from the bank to purchase a new Air jet for it. The loan will be paid in equal quarterly payments over 15 years starting at the end of the 1st year (A) .The value of the installment will be doubled for the last five years (2A) .If the interest rate is 8% per quarter compounded quarterly, Find:

a) The value of the equal payments (A)

b) If the company decided to pay off the remaining balance after the 35th payment, what will be their remaining balance then?

Note: I have solved part (a) and I got A = 43,1519.4874 $ per quarter. but for part b I can't solve it please help me. Thanks in advance.

Explanation / Answer

The totalc present value of payment made by the company upto 35 th payment:

If the company decided to pay off the remaining balance after the 35th payment, what will be their remaining balance then=Total loan-Prensent value of loan amount paid=$15,000,000-$10,787,391.40=$4,212,308.60

Quarter Quarter payment Pv@2% PV $ 1      4,31,519     0.9804         423,058.32 2      4,31,519     0.9612         414,763.06 3      4,31,519     0.9423         406,630.45 4      4,31,519     0.9238         398,657.30 5      4,31,519     0.9057         390,840.49 6      4,31,519     0.8880         383,176.96 7      4,31,519     0.8706         375,663.68 8      4,31,519     0.8535         3,68,297.73 9      4,31,519     0.8368         3,61,076.20 10      4,31,519     0.8203         3,53,996.28 11      4,31,519     0.8043         3,47,055.17 12      4,31,519     0.7885         3,40,250.17 13      4,31,519     0.7730         3,33,578.60 14      4,31,519     0.7579         3,27,037.84 15      4,31,519     0.7430         3,20,625.34 16      4,31,519     0.7284         3,14,338.56 17      4,31,519     0.7142         3,08,175.06 18      4,31,519     0.7002         3,02,132.41 19      4,31,519     0.6864         2,96,208.25 20      4,31,519     0.6730         2,90,400.24 21      4,31,519     0.6598         2,84,706.12 22      4,31,519     0.6468         2,79,123.65 23      4,31,519     0.6342         2,73,650.64 24      4,31,519     0.6217         2,68,284.94 25      4,31,519     0.6095         263,024.45 26      4,31,519     0.5976         257,867.11 27      4,31,519     0.5859         252,810.89 28      4,31,519     0.5744         247,853.81 29      431,519     0.5631         242,993.93 30      431,519     0.5521         238,229.35 31      431,519     0.5412         233,558.18 32      431,519     0.5306         228,978.61 33      431,519     0.5202         224,488.83 34      431,519     0.5100         220,087.09 35      431,519     0.5000         215,771.66 10,787,391.40

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