Question

# Loan of \$10000 with interest at j4 = 12%, is to be amortized by equal payments...

Loan of \$10000 with interest at j4 = 12%, is to be amortized by equal payments at the end of each quarter over a period of 30 quarters. Using the Retrospective Method, Determine the outstanding balance at the end of 12 quarters

Solution:-

First we need to calculate Quarterly Rate-

Quarterly Rate =

Quarterly Rate = 3%

To Calculate Quarterly Payment-

Quarterly Payment =

Quarterly Payment =

Quarterly Payment = \$510.19

Outstanding Installement After 12 Quarterly payment = 30 - 12 = 18 Installment.

Now, The Outstanding balance after 12 Quarterly Payment is = Present Value of 18 Intstallment

Present Value of 18 Installment = Installment Amount * PVAF (r, n)

Present Value of 18 Installment = \$510.19 * PVAF(3%, 18)

Present Value of 18 Installment = \$7,016.90

The Outstanding Principal after paying 12 quarterly payment is \$7,016.90

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