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Consider a loan for $100,000 to be repaid in equal installments at the end of each...

Consider a loan for $100,000 to be repaid in equal installments at the end of each of the next 5 years. The interest rate is 6% compounded annually. What is the remaining balance of the loan after 2 years?

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Expert Solution

Solution

Present value of annuity=Annuity payment*((1-(1/(1+i)^m))/i)

where

i-discount or intrest rate per period-6%

m-number of periods =5

Present value of annuity =100000

Annuity payment =?

Putting values in formula

Present value of annuity=Annuity payment*((1-(1/(1+.06)^5))/.06)

Solving we get annuity payment=$23,739.64

Now making amortization table

Formula used

Thus as it can be seen remaining balance after 2 years=$63,456.34

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jeff jeffy answered 2 years ago
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