Question

Eliza takes out a $36000 loan at an annual effective interest rate of 6%. It is agreed that at the end of each of the first six years she will pay $1800 in principal, along with the interest due, and that at the end of each of the next eight years she will make level payments of $2500. Eliza will make one final payment at the end of fifteen years to exactly complete her loan obligation. Calculate the amount of Eliza's fifth payment, the amount of her tenth payment, and the amount of her fifteenth payment.

Please do it without excel. Use relevant formulas.

Answer 1

(1) 5th Payment

$1,800 principal + Interest for 5th year

interest will be charged on principal balance after 4 years payment

Principal = $36,000

Interest rate = 0.06

=$1800+ [$36,000- ($1,800*4)]*0.06

=$1,800+$1,728

=$3,528

(2) 10thpayment

As given int he question 10th payment including interest = $2,500

(3) 15 th payment

=Balance of principal loan at the end of 15th years+interest charged on balance at the beginning of 15th year

formula for EMI = P X R X (1+R)^N]/[(1+r)^n-1]

Principal after 6th payment = $36,000 -($1800*6)]

=$25,200

=($25,200)*1.06^8 - 2500/0.06*(1.06)^8-1

=40,164.97-24,743.33

=$15,421.64

15th payment = $15,421.64 + ($15,421.64*6%)

=$16,346.94