A woman takes out a loan to be paid back over 4 years at j₁₂ = 6% with monthly payments of $281.82.After 14 payments,the outstanding balance on the loan is $8791.53.The woman then misses the next 3 payments (from time 15 to 17).She begins making regular monthly payments at time 18.If she still intends to pay back her loan in full by the end of 4 years,what is the size of her new monthly payment? (she has 31 payments left)

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The outstanding balance after 14 payments is $8791.53. The missed payments accrue interest, so the balance at time 18 is $8791.53 * (1 + 0.06/12)^3. To pay off this balance in 31 payments, the new monthly payment is calculated using the formula for the present value of an annuity. Solving this gives approximately $311.48.

A Woman Takes Out a Loan to Be Paid Back