Answer:
Annual loan payment = $13,146.78
Explanation:
<em>Loan Amortization: A loan repayment method structured such that a series of equal periodic installments will be paid for certain number of periods to offset both the loan principal amount and the accrued interest.</em>
The monthly equal installment is calculated as follows:
Monthly equal installment= Loan amount/Monthly annuity factor
Monthly annuity factor
=( 1-(1+r)^(-n))/r
r- Monthly interest rate (r)
= 7.25%/12= 0.604
%
n- Number of months ( n) in 5 years
= 12* 6 = 60
Annuity factor
= ( 1- (1.00604)^(-60)/0.00604= 50.2024
Monthly installment= 55,000 /50.2024 = $1,095.56
Monthly installment = $1,095.56
Annual loan payment = monthly installment × 12
Annual loan payment =$1,095.56 ×12=13,146.78
Annual loan payment = $13,146.78
