Question

Consider a loan of $10000 that is paid off quarterly over a period of one year. The agreed statement with the bank that the interest will be paid completely only on the last quarter. On the other hand, th first 3 principal payments from the original loan will have the same value while the last principal payment is just $1000. Calculate the dollar amount of interest and loan principal repaid corresponding to each payment if the interest rate is 10% each quarter Period Beginning Beginning balance Interest Total owed Principal repayment Total payment What is the total Interest value been paid? Total in

Answer 1

Answer: Based on the inputs given

Inputs: Interest @ 10% each quarter, 10000 $ loan, 10000 Less 1000 paid in equal installment, i.e. 9000 $, Interest paid in the last quarter , hence , need to calculate interest on amount of principle plus interest

Total interest value to be paid is 2718 $. Below table explains the workings

						Fig in $
Period	Beginning Balance	Interest	Total owned	Principle repayment	Total Payment	Closing Balance
Q1	10000	1000	11000	3000	3000	8000
Q2	8000	800	8800	3000	3000	5800
Q3	5800	580	6380	3000	3000	3380
Q4	3380	338	3718	1000	3718	0
Total		2718