You borrow $70,000 and arrange to pay off the loan in five equal annual installments.
Payments will be made at the end of each year. The loan interest rate is 7.50 percent.
What percentage of your second year's payment will go toward interest?
A. 
19.5 percent 

B. 
17.2 percent 

C. 
80.5 percent 

D. 
28.7 percent 

E. 
25.1 percent 
Present value of annuity=Annuity[1(1+interest rate)^time period]/rate
70000=Annuity[1(1.075)^5]/0.075
70000=Annuity*4.045884902
Annuity=70000/4.045884902
=$17301.53(Approx)
Interest payment for the first year=$70,000*7.5%=$5250
Hence principal paid for the first year=(17301.535250)=$12051.53
Hence balance owed after first year=(70,00012051.53)=$57948.47
Interest paid for second year=$57948.47*7.5%
=$4346.13525
Hence interest payment % =$4346.13525/$17301.53
=25.1%(Approx).
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