Question

The present value of a debt is $20,000. To pay off the debt that accrues 8% annual interest on the unpaid balance. You will make three payments to pay off the loan- at year 2 your payment will be $5000; at year 3 your payment will be $7000. What will be the final payment amount in year 5?

$13,562
$14,923
$10,640
$15,981

Answer 1

Calculating the Final Payment using the Amotization table:-

Year	Beg bal. (a)	Payment	Interest amount [(a)*8%]	End Bal.
1	20,000.00	-	1,600.00	21,600.00
2	21,600.00	5,000.00	1,728.00	18,328.00
3	18,328.00	7,000.00	1,466.24	12,794.24
4	12,794.24	-	1,023.54	13,817.78
5	13,817.78	-	1,105.42	14,923.20

Note- End Balance = Beginning Balance + Interest Amount - Payment

So, the Final Payment at the end of yaer 5 is $14,923

Option 2

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