Answer:
Interest will be the smallest at the sixth instalment which is $859.2033.
Step-by-step explanation:
<em>Amount borrowed: $120,000</em>
<em>Instalments: 6</em>
<em>Amount paid each year: 120,000/6 = $20,000</em>
<em>Interest: 6.5%</em>
<em>Formula to calculate each instalment = yearly instalment+(amount borrowed * interest)</em>
<em>Formula to calculate outstanding amount = Amount borrowed - previous instalment</em>
First instalment: 20,000 + (120,000 x 6.5%) = $ 27,800
<u>Outstanding amount = 120,000-27800 = </u><u>$112,200</u>
Second instalment: 20,000 + (112,200 x 6.5%) = $27,293
<u>Outstanding amount = 112,200-27,293 =</u><u> $84,907</u>
Third instalment: 20,000 + (84,907 x 6.5%) = $25,518.955
<u>Outstanding amount = 84,907-25518.955 = </u><u>$59,389</u>
Fourth instalment: 20,000 + (59,388.045 x 6.5%) = $23,860.223
<u>Outstanding amount = 59,388.045-23,860.223 = </u><u>$35527.822</u>
Fifth instalment: 20,000 + (35,527.822 x 6.5%) = $22309.30843
<u>Outstanding amount: 35,527.822-22309.30843 = </u><u>$13218.51357</u>
Sixth instalment: 20,000 + (13218.51357 x 6.5%) = $20,859.2033
Interest will be the smallest at the sixth instalment which is $859.2033.
