Question

An entrepreneur borrows $500,000 today. The interest rate is 11.5%. If the entrepreneur makes annual payments of $70,000 per year, how many years will it take to repay the loan?

Answer 1

Answer:

After 18.44 year loan will be paid

Explanation:

We have given an entrepreneur borrows $500,000 today.

So total amount is $500000

Annual payment is of $70000

Rate of interest r = 11.5 %

We have to find the time period

We know that total amount is given by

$A=P(1+\frac{r}{100})^n$, here A is total amount , P is yearly paid amount, r is rate of interest and n is time period

So $500000=70000\times (1+\frac{11.25}{100})^n$

$7.142=1.1125^n$

Taking log both side

$log7.142=nlog1.1125$

$n\times 0.0463=0.8538$

n = 18.44 year

So after 18.44 year loan will be paid