Homework Answers
Annual Installment = Loan Amount / Present Value Annuity factor of 10% for 5 years
= $6,000 / [1/(1.1)1 + 1/(1.1)2 + 1/(1.1)3 + 1/(1.1)4 + 1/(1.1)5]
= $6,000 / 3.7908 = 1582.78
| YEAR (1) | OPENING BALANCE (2) | INSTALLMENT (3) | INTEREST (4) = (2) *10% | CLOSING BALANCE (5) = (2) - (3) + (4) |
| 1 | $ 6000 | $ 1582.78 | $ 600 | $ 5017.22 |
| 2 | $ 5017.22 | $ 1582.78 | $ 501.72 | $ 3936.16 |
| 3 | $ 3936.16 | $ 1582.78 | $ 393.62 | $ 2747 |
So balance after third year payment is $ 2746.98.
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