7. Cal Lury owes $38,000 now. A lender will carry the debt for seven more years

Question

7. Cal Lury owes $38,000 now. A lender will carry the debt for seven more years at 8 percent interest. That is, in this particular case, the amount owed will go up by 8 percent per year for seven years. The lender then will require that Cal pay off the loan over the next 15 years at 11 percent interest. What will his annual payment be?

7. Cal Lury owes $38,000 now. A lender will carry the debt for seven more years at 8 percent interest. That is, in this particular case, the amount owed will go up by 8 percent per year for seven years. The lender then will require that Cal pay off the loan over the next 15 years at 11 percent interest. What will his annual payment be?

Explanation / Answer

Loan at the end of 7 years = 38000*(1.08)^7 = 65125.32

This will be equal to PV = 65125.32

number of years (N) = 15 years

Interest (1/Y) = 11%

FV =0

Put these values in the calculator

then click CPT

enter PMT click

annual payment (PMT) = $9056.67

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