A loan repayment plan is scheduled to be made as uniform payments of dollar 2, 100 each over 4 years.
The first repayment is expected to take place on Feb I^st in the year 2018. Subsequent repayments will take place on Feb 1st in the years 2019, 2020, and 2021. The loan will be taken as a lump sum of value dollar 5, 500 on Feb 1st this year.
Create a cash flow diagram of the loan transactions, borrowing and expected repayments.
If the principal of the loan needed is to be repaid in full using the given repayment schedule in, what is the interest rate which the lender (the bank) is charging in this case?
If the interest rate offered by the bank was changed shortly before signing the agreement to 5.5 percentage.
Given the previous repayment schedule (dollar 2100 per year for 4 years) remaining the same, what is the maximum amount which can be borrowed at this new rate? Please note that this value may be different from the 5, 500 originally planned.