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A 10 year loan is being repaid with payments at the end of each year in...

  1. A 10 year loan is being repaid with payments at the end of each year in the following manner. The first payment is $5,000 and each subsequent payments decreases by $400. Find the original amount borrowed. Assume i(4) = 6%.

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Answer #1

First Payment (A) = $5,000

Annual change in payment (Gradient) = -$400

APR, compouded quarterly = 6%

Effective annual rate(i) = (1+0.06/4)^4-1 = 0.0614

No. of payment (n) = 10

Amount Borrowed = P

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