Question

You are taking out an $11,000 loan today at 7% compounded annually. You will pay back the loan with 6 equal end-of-year payments.

How much interest will you owe in the third year?

How much will you owe the bank at the end of the third year?

Answer 1

Year	Beginning Balance	Payment	Principal Payment	Interest Payment	Ending Balance
1	$11,000.00	$2,307.75	$1,537.75	$770.00	$9,462.25
2	$9,462.25	$2,307.75	$1,645.40	$662.36	$7,816.85
3	$7,816.85	$2,307.75	$1,760.57	$547.18	$6,056.28
4	$6,056.28	$2,307.75	$1,883.81	$423.94	$4,172.46
5	$4,172.46	$2,307.75	$2,015.68	$292.07	$2,156.78
6	$2,156.78	$2,307.75	$2,156.78	$150.97	$0.00

How much interest will you owe in the third year?

547.18

How much will you owe the bank at the end of the third year?

6056.28