Question

Nico makes annual end-of-year payments of $5,043.71 on a four-year loan with an interest rate of 13 percent. The original principal amount was ________.

Answer 1

We need to find the principal amount on an interest rate of 13% where the end of year payment is $5043.71.

The original amount is $\ 15002.37$.

i = Interest rate = 13%

n = Compounding period = 4 years

E = End of year payment = $5043.71

The required formula is

$P=\dfrac{E[1-(1+i)^{-n}]}{i}\\\Rightarrow P=\dfrac{5043.71[1-(1+0.13)^{-4}]}{0.13}\\\Rightarrow P=\ 15002.37$

The original principal amount was $\ 15002.37$.

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