Hi, Can someone please explain why the expression for the prospective solution, for the loan outstanding after the second payment, is given as follows for the example question in page 9 Chapter 9? Prospectively Solution: 12,759.16 v@8% ( 1 + a2@12%) I think a2@12% refers to the loan outstanding after the third payment. But I am not sure about the other expression. Thank you very much for your help. Example Question: A loan of 50,000 is repayable by equal annual payments at the end of each of the next 5yrs. Interest is 8% pa for the first 3 yrs and 12% pa thereafter. Calculate the loan outstanding immediately after the second repayment.
Hi, I attempted the example question and the solution I found was outstanding loan prospectively: 12,563.16 (a2@12% + v^2@12%) = 12,563.16 x (1.69 + 0.797) = 31,735.31 But the solution provided by the book is 12,563.16 v@8%(1 + a2@12%) = 12,759.16 x 0.9259 x 2.6901 = 31,781 I do not understand the solution in the study material and why the two answers are different. Could someone please enlighten me? Thank you for your help.
Well the two expressions are different so naturally they're not going to give the same answer! Yours values two payments (in 1 year and 2 years) in the annuity and then another payment in 2 years all at 12%. But the payment in 1 year should be 8%. Also you have two payments in two years and none in 3 years.
Loan Sechedule plz explain me how both solution came . i.e Page 9 example by prospectively & retrospectively method.
Bonus points for the 5-year necro. Prospective: The PV of future loan repayments. (1 12k payment + the pv of 2 subsequent payments at 12%)discounted by one year at 8%. Retrospective: The Accumulated inital loan value - the accumulated loan payments. So 50k indexed for 2 years at 8% - 1 repayment indexed by 8% - 1 repayment which has happened directly before the valuation.
