Al borrows $7000 from Sue. He will repay the loan with annual payments at the end of the year. Payments are $1000, 2000, etc. plus a small final payment one year after the last regular payment. The rate of discount is 8% convertible quarterly. Find the final payment.

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Al borrows $7000 from Sue. He will repay the loan with annual payments at the end of the year. Payments are $1000, 2000, etc. plus a small final payment one year after the last regular payment. The rate of discount is 8% convertible quarterly. Find the final payment.

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Darshita6.14K 0 Comments

Answer : final payment : $ 2,691

Working notes for the above answer is as follow

Loan Amount $7,000
Installment
Fiiest 1000
Second 2000
Third 3000
Fourth      ?
The calculation of interest in the instalment
Installment Beginig Amount in$ Amount in $ Interest @8 % Loan payment Balance amount
Fiiest 7000 1000 560 440 6560
Second 6560 2000 524.8 1475.2 5084.8
Third 5084.8 3000 406.784 2593.216 2491.584
Fourth 2491.584 2690.91 199.32672 2491.58328 0

So we can say that

last instalmet =$ 2691

Interest in last installment = $ 200

Loan amount in last installment =2491
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