Question

A loan of $10,000 is to be repaid by annual payments of $1,000 with the first payment occurring 1 year from now, and continuing as long as necessary. The last payment is less than the regular payment and is paid exactly one year after the final regular payment. If the interest rate is 3% effective, when is the partial payment made and what is the amount of the partial payment?

Answer 1

Year		PVF @ 3%	Present value
1	1000	0.970874	970.8738
2	1000	0.942596	942.5959
3	1000	0.915142	915.1417
4	1000	0.888487	888.487
5	1000	0.862609	862.6088
6	1000	0.837484	837.4843
7	1000	0.813092	813.0915
8	1000	0.789409	789.4092
9	1000	0.766417	766.4167
10	1000	0.744094	744.0939
11	1000	0.722421	722.4213
12	1000	0.70138	701.3799
Total Regular paymentmade			9954
Loan amount				10000
Less: Regular payment				-9954
balannce left				46
Add: Interest @ 3%				1.38
Amount of partial payment to be made at end of 13th yr				47.38