Question

How much will Kingston Technologies have to pay each year in 12 equal payments, starting 2 years from now, to repay a $800,000 loan. The interest rate is 11% per year?

Kingston Technologies will have to pay $ each year to repay the loan.

Answer 1

Loan Amount = $800,000

Rate of interest = 11%

Number of installments = 12

Interest will be calculated for 14 years because the first payment is two years from the date of loan.

Repayment amount (including interest) can be calculated by the following formula:

Where, F.V. is the Future Value, A is the amount of loan, r is the rate of interest and n is the number of periods.

Putting the values:

So, $3,448,352.78 is the total amount to be repaid including interest.

12 equal annual installments are to be paid each year. So, annual installment equals

So, $287,362.732 is the amount to be paid each year in order to repay the loan.