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$10,000 is borrowed at 10% a year interest for five years. At the end of each year, the borrower...

Question:

$10,000 is borrowed at 10% a year interest for five years. At the end of each year, the borrower pays a fixed amount of $2368. Solve for the yearly payment AND the remaining principle at the end of each year. Also, determine the total payment made over the 5 years.

Repayment Schedule

When someone takes a loan the repayment schedule attached to the loan tells the amount needs to be paid in the period and interest and principal component covered in the installment.

Answer and Explanation:

The 5-year repayment schedule for the loan is as below

Year Openin Balance Interest @10% Repyament Closing Balance
1 10,000 1,000 2,368 8,632
2 8,632 863 2,368 7,127
3 7,127 713 2,368 5,472
4 5,472 547 2,368 3,651
5 3,651 365 2,368 1,648
11,840

the last column of closing balance represents the amount of principle left at the end of each year.

Also, the payment made during the 5 years is $11,840 still 1,648 is left to be paid


Learn more about this topic:

Debt Repayment Issues: Signs & Examples
Debt Repayment Issues: Signs & Examples

from Focus on Personal Finance: Online Textbook Help

Chapter 5 / Lesson 17
169

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