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Math Help - Changed loan terms, what did I lose?

  1. #1
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    Changed loan terms, what did I lose?

    Hi, first time posting here, great forum BTW.

    I have been negotiating a relocation package with my company and they originally agreed to provide an interest free 5 year loan for $45,000 to be paid back by me in equal amounts annually.

    The terms have now changed to 3 years and I'd like to know the value of the money I've lost due to this change.

    Basically over the 3 years I will be short $6000 each year in comparison to the 5 year loan. So from my perspective I will be short $18000 plus interest at the end of 3 years. How do I calculate this interest? Would I just take the future value of the $18k at, say 6.0% interest/yr? Should this be compounded?

    Thank you in advance for your assistance!
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  2. #2
    Grand Panjandrum
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    Quote Originally Posted by Psyclone*Jack View Post
    Hi, first time posting here, great forum BTW.

    I have been negotiating a relocation package with my company and they originally agreed to provide an interest free 5 year loan for $45,000 to be paid back by me in equal amounts annually.

    The terms have now changed to 3 years and I'd like to know the value of the money I've lost due to this change.

    Basically over the 3 years I will be short $6000 each year in comparison to the 5 year loan. So from my perspective I will be short $18000 plus interest at the end of 3 years. How do I calculate this interest? Would I just take the future value of the $18k at, say 6.0% interest/yr? Should this be compounded?

    Thank you in advance for your assistance!
    What you need to do is calculate how much you need to deposit today at 6% to meet the two loan repayment schemes. What you have lost is the difference between these amounts.

    I make the amount for the 5 year loan 46911.27, and for the 3 year loan 55095.18, so you are losing in current value about 8183.91 dollars.


    RonL
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  3. #3
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    The loan repayment will be taken out of future bonus payments made annually to me, I should have clarified that.

    So the change in the term is reflected in a decrease in my bonus payment over the next three years, a decrease of $6000 per year, in order to make payments of $15000/yr. I've calulated the compounded interest on that at 1.19*$18000 = $3438. Does that seem like the correct way to look at this?
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