Question

A borrower had a loan of 500 000 0045 compounded annually, with annual payments Suppose the borrower paid off the loan after 4 years Calculate the amount needed to pay of the loan The amount needed to pay of this loon after 4 years is (Round to the nearest cont as needed)

Answer 1

Annual Payment = [P x R x (1+R)^N]/[(1+R)^N-1]
Where,
P= Loan Amount
R= Interest rate per period
N= Number of periods
= [ $90000x0.04 x (1+0.04)^7]/[(1+0.04)^7 -1]
= [ $3600( 1.04 )^7] / [(1.04 )^7 -1
=$14994.865
Loan balanace after 4 years ( balance to be paid)
Present Value Of An Annuity
= C*[1-(1+i)^-n]/i]
Where,
C= Cash Flow per period =$14994.865
i = interest rate per period =4%
n=number of period =7-4 = 3
= $14994.865[ 1-(1+0.04)^-3 /0.04]
= $14994.865[ 1-(1.04)^-3 /0.04]
= $14994.865[ (0.111) ] /0.04
= $41,612.12