Question

1. You get a $13,000 loan over a five-year period at 10% per year interest. The payments are to be made monthly. What is the unrecovered balance immediately after the first payment has been made?

Answer 1

Monthly payment	=	[P × R × (1+R)^N ] / [(1+R)^N -1]
Using the formula:
Loan amount	P	$                                                            13,000
Rate of interest per period:
Annual rate of interest		10.000%
Frequency of payment	=	Once in 1 month period
Numer of payments in a year	=	12/1 =	12
Rate of interest per period	R	0.1 /12 =	0.8333%
Total number of payments:
Frequency of payment	=	Once in 1 month period
Number of years of loan repayment	=	5.00
Total number of payments	N	5 × 12 =	60
Period payment using the formula	=	[ 13000 × 0.00833 × (1+0.00833)^60] / [(1+0.00833 ^60 -1]
Monthly payment	=	$                                                            276.21

Period	Beginning liability	Uniform monthly payment	Interest owed	Principal payment	Total owed at end of month
N	A	C	B= A* 0.008333	D=C-B	E=A-D
1	13,000.00	276.21	108.33	167.88	12,832.12

Answer is $12,832.12

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