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Miss Sun Tzi obtained a level principal and interest on the balance loan of $7142490. The...

Miss Sun Tzi obtained a level principal and interest on the balance loan of $7142490. The nominal rate of interest is 0.6% with a term of 4 years and payments scheduled at the end of each day. Compute the interest expense associated with the 14th period.

Solutions

Expert Solution

As shown in chart above, Outstanding Principal on each date is computed as Previous Outstanding Principal - Payment 1 (Intrest) - Payment 2 (Level Principal).

If we stimulate the figures or try on hit and trial, we can make the 4 years later outstanding principal to zero while keeping level principal same throughout the period.

the equation results in level principal = $4833.60 and per day interest rate factor is already = 0.006/365=1.64384x10^-5

1st 18 payments are displayed in the chart, and for the 14th payment, outstanding principal is $70,73,183.25 and interest factor is 1.64384x10^-5 . Therefore, Interest payment/expense = $70,73,183.25*1.64384x10^-5 = $116.35

jeff jeffy answered 1 year ago
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