question archive Your friend Bob, is going through some tough time financially and you want to help him out
Your friend Bob, is going through some tough time financially and you want to help him out
Subject:FinancePrice: Bought3
Your friend Bob, is going through some tough time financially and you want to help him out. You are negotiating to lend a 7-year loan of $30,000 to him. To repay you, Bob will pay $4,000 at the end of Year 1, $6,000 at the end of Year 2, and $8,000 at the end of Year 3, plus a fixed but currently unspecified cash flow, X, at the beginning of Years 4 through 7. Because you and Bob are long-time friend, you are confident that Bob will make all 7 yearly payments. You regard 9% as an appropriate rate of return on this 7-year loans. What amount does Bob have to pay from Year 4 to Year 7 (i.e., what is X?). To clarify, the amount X is same from Year 4 to Year 7.
