Question

Leon borrowed $10,000 at 8.7% compounded annually. Provided that he made a payment of $7,000 after...

Leon borrowed $10,000 at 8.7% compounded annually. Provided that he made a payment of $7,000 after 3 years, how much is he expected to pay to clear the loan 5 ½ years from the date of borrowing?

Homework Answers

Answer #1

$ 7,198.77

Step-1:Calculation of total amount due 3 years from now
Total Amount due 3 years from now = fv(rate,nper,pmt,pv)
= $12,843.66
Where,
rate = 8.70%
nper = 3
pmt = 0
pv = -10,000
Step-2:Calculation of balance of loan due 3 years from now
Total amount due 3 years from now $12,843.66
Less amount repaid 7,000.00
Balance Loan amount $ 5,843.66
Step-3:Calculation of final amount 5 1/2 years from now to be paid
Total Amount due 5 1/2 years from now =fv(rate,nper,pmt,pv)
= $7,198.77
Where,
rate = 8.70%
nper = 2.5
pmt = 0
pv = -5,843.66
Note:
5 1/2 Years from now is equal to 2.5 years from 3 years from now.
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