Problem No.

29

A firm borrows $2000 for 6 years at 8%, to be repaid in lump sum at the end of 6 yr. At the

end of 6 yr, the firm renews the loan amount due plus $2000 more for 2 yr at 8%. What is most

nearly the amount of loan renewal?

A. $5280 B. $5750 C. $5510 D. $6140

Given: P = $2000 n1 = 6 years I = 8% n2 =2 years

Required: Amount of loan

Schematic: F1 F2

P=$2000 n1=6 n2=2

Solution:

FT = F1 + F2

FT = P(1+(in1)) + P(1+(in2))

Substitution:

= $2000(1+(0.08*6)) + $2000(1+(0.08*2))

FT = $5280

Answer: A. $5280

Problem No.29

A firm borrows $2000 for 6 years at 8%, to be repaid in lump sum at the end of 6 yr. At the

end of 6 yr, the firm renews the loan amount due plus $2000 more for 2 yr at 8%. What is most
nearly the amount of loan renewal?

A. $5280 B. $5750 C. $5510 D. $6140

Given: P = $2000 n1 = 6 years I = 8% n2 =2 years

Required: Amount of loan

Schematic: F1 F2

P=$2000 n1=6 n2=2

Solution:

FT = F1 + F2

FT = P(1+(in1)) + P(1+(in2))

Substitution:

= $2000(1+(0.08*6)) + $2000(1+(0.08*2))

FT = $5280

Answer: A. $5280