Question

Payments on a Jan. 1, 1995 40,000 loan are as follows: 1/1/96 5,000 1/1/97 5,000 1/1/98 5,000 On July 1, 1998 an additional 10,000 is paid on the loan and no more payments are made. If {{d}^{(4)}=0.1} how much is owed on the loan on Jan. 1, 2005?

Answer 1

Answer:

Amount $55,386.92

Explanation:

We solve for the outstanding amount after July 1998 payment and then future value until Jan 1st 2005:

Beginning Payment Interest Carrying value

1995 40000          4000     44000

1996 44000 -5000 3900     42900

1997 42900 -5000 4290      42190

1998 42190 -5000 2109.5     39299.5

1998 39299.5 -10000 1964.975     31264.475

Now, we calculate the future value from Jan 1999 to Jan 2005:

$Principal \: (1+ r)^{time} = Amount$

Principal 31,264.48

time 6.00

rate 0.10000

$31264.475 \: (1+ 0.1)^{6} = Amount$

Amount 55,386.92