A small industrial contractor purchased a

Chapter 7, Problem 7.5

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A small industrial contractor purchased a warehousebuilding for storing equipment and materialsthat are not immediately needed at constructionjob sites. The cost of the building was $100,000and the contractor has just made an agreementwith the seller to finance the purchase over a 5-yearperiod. The agreement states that monthly paymentswill be made based on a 30-year repaymentschedule of interest on the unrecovered balance ofthe principal; however, the total remaining balanceof principal and interest at the end of year 5 mustbe paid in a lump-sum balloon payment. What isthe size of the balloon payment, if the interest rateon the loan is 0.5% per month?

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