The Contract for a $4,000 Loan at 9% Compounded Quarterly

Short Answer

The contract for a $4,000 loan at 9% compounded quarterly requires two payments. The first payment of $2,000 is required two years after the date of the loan. (It is applied to the balance owed after conversion of interest to principal every three months.) A second payment in the amount needed to pay off the loan is due one year later. What price would an investor pay for the contract six months after the date of the loan to earn 10% compounded semi-annually on the purchase price?