You receive a 3-year $23,000 loan with an interest rate of 13% p.a., to be repaid...

You receive a 3-year $23,000 loan with an interest rate of 13% p.a., to be repaid in three annual installments. The loan requires that you make two equal total payments of $2,000 at t = 1 and t = 2, with the remaining loan balance paid at maturity. What is the total payment amount at t = 3, rounded to the nearest dollar?

Expert Solution

Total payment at t=3 = $25108.70

The amount is greater than the initial loan amount since the first two payments are not even sufficient to cover the interest due.

Year	Opening Balance	Annual payment	Principal Paid	Interest
1	23000	$2,000.00	($990.00)	2990
2	$23,990.00	$2,000.00	($1,118.70)	3118.7
3	$25,108.70

Workings

jeff jeffy answered 13 hours ago

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