Question

Suppose that a loan is being repaid with 20 annual payments with the first payment coming one year from now. The first 5 payments are for $220, the next 8 are $340 each, and the final 7 are $410 each. If the effective rate of interest is 6.1%, how much interest is in the 11th payment?

Answer 1

present value of the loan at the end of 10 annual payments

=340/(1+6.1%)^1+340/(1+6.1%)^2+340/(1+6.1%)^3+410/(1+6.1%)^4+410/(1+6.1%)^5+410/(1+6.1%)^6+410/(1+6.1%)^7+410/(1+6.1%)^8+410/(1+6.1%)^9+410/(1+6.1%)^10

=2816.63

how much interest is in the 11th payment

=2816.63*6.1%

=171.81

the above is answer..