Question

In: Finance

A 30-year loan of 1100 is repaid with payments at the end of each year. Each...

A 30-year loan of 1100 is repaid with payments at the end of each year.

Each of the first fifteen payments equals 155% of the amount of interest due. Each of the last fifteen payments is X.

The lender charges interest at an annual effective rate of 8%. Calculate X

a. 57

b. 65

c. 77

d. 82

e. 46

Expert Solution

Outstanding balance after 15 payments = 560
calculate the equal annual payment for this loan.
Yearly payment of a loan is given by

X = L[r(1 + r)^n]/[(1 + r)^n - 1]

X = Annual payment
r = 0.08
n = 15

L= Loan amount = 560

X = 560*(0.08(1 + 0.08)^15)/((1 + 0.08)^15 - 1) = 65.42

X = 65.

Correct answer is Option B "65".

Excel formula:

jeff jeffy answered 3 days ago

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