Question

A loan of XX is repaid with level annual payments at the end of each year for 10 years. You are given: i.The interest paid in the first year is 3,600; and ii.The principal repaid in the 6th year is 4,871. Calculate XX.

Answer 1

Answer:

XX is 48000

Explanation:

The use of Microsoft excel is essential for this.

Consider that the principal is XX

and time for repayment is 10 years

Simple Interest = (Principal*Rate*Time)/100

If the 1st year interest = 3600

Then Principal = (3600*100)/rate

And rate can be calculated as (3600*100)/principal

But in this case, since we are dealing with percentage in rate, say

rate = 3600/principal

The rate will be equal to 7.5%

If rate is 7.5%

Then Principal = (3600*100)/7.5

Principal XX = 48000