$10,000 is borrowed at 10% a year interest for five years. At the end of each year, the borrower pays interest plus 20% of the initial principal. 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.
When someone takes a loan, the repayment schedule attached to the loan tells the amount that needs to be paid and the interest and principal component covered in the instalment.
Answer and Explanation:
The 5-year repayment schedule for the loan is as below:
|Year||Openin Balance||Interest @10%||Repyament||Closing Balance|
The last column of closing balance represents the amount of principal left at the end of each year. Also, the payment made during the 5 year period is $13,000.
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from Focus on Personal Finance: Online Textbook HelpChapter 5 / Lesson 17