Answer :
Answer:
(a) $1.936 million
(b) $336,000
Explanation:
(a) Assuming that the loan made by Valco Multi-position Valves was compounded yearly, the total lump sum of an initial investment of $1.6 million at 10% per year interest after two years is:
[tex]L=1.6*(1+0.10)^2\\L=\$1.936\ million[/tex]
(b) The amount of interest paid is given by the lump sum after two years minus the original value borrowed:
[tex]I=\$1.936\ million - \$1.6\ million\\I=\$336,000[/tex]
The amount of payment is $1.936 million and the amount of interest is $336,000.
a. The total lump sum of an initial investment of $1.6 million at 10% per year interest after two years is:
Amount = 1.6 * (1+0.10)^2
Amount = $1.936 million
b. The amount of interest paid is:
Interest = $1.936 million - $1.6 million
Interest = $336,000
In conclusion, the amount of payment is $1.936 million and the amount of interest is $336,000.
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