Jack plans to pay off an instalment loan with payments of $1,000 every quarter in the first year and $2,000 every quarter in the second and third years. All the payments will be withdrawn from a return- guarantee investment account set up solely for the purpose. The account will generate an interest of 3% per quarter. The first loan repayment will be made one quarter from now.
(a) Compute the minimum size of the lump-sum (single) payment that Jack will need to deposit into the account today in order to meet all the repayments in the next three years.
(b) HowmuchmorewillJackneedtodepositintotheaccounttodayifhewouldliketohave$5,000 left in the account right after the last payment was made?
(c) Continued with part (a). If Jack’s parents help Jack out in his finance by making all the payments in Year 3 for Jack, how much less will Jack need to deposit into the account today?
(d) If Jack’s parents make the payments for him for Year 2 (instead of Year 3), how much more balance will Jack find in the investment account at the end of Year 3?
