
Economics Economics Forum  Financial Mathematics, Econometrics, Operations Research, Mathematical Finance, Computational Finance 
 LinkBack  Thread Tools  Display Modes 
July 3rd, 2010, 10:55 AM  #1 
Newbie Joined: May 2010 Posts: 5 Thanks: 0  Loan
Hello, since an exam is coming up, I was practicing. Came across a question and solved it, but want to make sure if it is correct. Q)An overseas student wishes to take a loan for $60,000 to pay for his university studies. The bank agrees to let him pay in three installments: $10,000 due in 3 years time, $30,000 due in 10 years time and the balance at the end of the 15 year period. Calculate the amount of the final payment if the interest rate is 6% compounded six monthly. A) this is how i solved it: 1) 10,000 (1+0.06/6)^6 = 10,615.20 2)30,000 (1+0.06/20)^20 = 31,852.24 So, there is 20,000$ remaining. 3)20,000(1+0.06/30)^30 = 21235.46 Is this correct? do I need to add something? Much appreciated. 
July 3rd, 2010, 11:21 AM  #2 
Global Moderator Joined: Nov 2006 From: UTC 5 Posts: 16,046 Thanks: 938 Math Focus: Number theory, computational mathematics, combinatorics, FOM, symbolic logic, TCS, algorithms  Re: Loan
You divide by 6 and 20 when you should be dividing by 2 (two payments per year). But more than that, you're having the student *earn* interest rather than *pay* interest in the first two calculations, which isn't right. You need to take the principle ($60,000) accrue interest for 3 years, subtract $10,000, accrue interest for 7 years, etc.

July 3rd, 2010, 11:28 AM  #3 
Newbie Joined: May 2010 Posts: 5 Thanks: 0  Re: Loan
Ok, redid it again and this is what I got. By using S=P(1+i)^n. S= 60,000(1+0.06/2)^30 = 145,635.74 S1=10,000(1+0.06/2)^24 = 20,327.94 S2=30,000(1+0.06/2)^10 = 40,317.49 FP= 145,635.74  20,327.94  40,317.49 = 8499.31 Is this one correct? Appreciate your quick reply 
July 5th, 2010, 08:08 AM  #4  
Global Moderator Joined: Nov 2006 From: UTC 5 Posts: 16,046 Thanks: 938 Math Focus: Number theory, computational mathematics, combinatorics, FOM, symbolic logic, TCS, algorithms  Re: Loan Quote:
 
October 27th, 2010, 02:51 AM  #5 
Newbie Joined: Oct 2010 Posts: 1 Thanks: 0  Re: Loan
Yes it is correct within this interest rates. The main principle will change then your calculator will give right answer.


Tags 
loan 
Thread Tools  
Display Modes  

Similar Threads  
Thread  Thread Starter  Forum  Replies  Last Post 
% payment loan  Denis  Algebra  1  July 8th, 2016 05:22 PM 
% payment loan  Denis  New Users  1  June 5th, 2013 09:45 AM 
Need help calculating a car loan  pinny  Elementary Math  1  April 3rd, 2013 07:40 AM 
Annuity loan  Brandonlive  Elementary Math  1  September 14th, 2012 06:29 AM 
Conventional Loan Calculation. Help!!  Wizard and Chips  Algebra  1  June 9th, 2009 07:32 AM 