Question

A loan for $85,000 is to be paid in 10 yearly payments. Each payment is larger by $100.00. Compute the first, the fourth, and the last payment, if the time value of money is 10% per year.

Answer 1

1st payment = $9350

4th payment = $9650

last 10th payment = $10250

Step-by-step explanation:

given data

loan = $85000

time = 10 year

each payment larger = $100

time value of money = 10% per year

to find out

first, the fourth, and the last payment

solution

we find here actual value at end of 1st year that is

actual value = loan amount + 10% of loan

actual value N = 85000 + (10% ×85000 )

actual value N = $93500

so

1st payment is =
`(actual value)/(total time)`

1st payment is =
`(93500)/(10)`

1st payment = $9350

and

4th payment = 1st payment + 3× each payment larger

4th payment = 9350 + 3×100

4th payment = $9650

and

last 10th payment = 4th payment + 6× each payment larger

last 10th payment = 9650 + 6× 100

last 10th payment = $10250