Question

A loan of $100,000 is made today. This loan will be repaid by 10 level repayments, followed by a final smaller repayment, i.e., there are 11 repayments in total. The first of the level repayments will occur exactly 2 years from today, and each subsequent repayment (including the final smaller repayment) will occur exactly 1 year after the previous repayment. Explicitly, the final repayment will occur exactly 12 years from today. If the interest being charged on this loan is 3.6% per annum compounded half-yearly, and the final smaller repayment is $270, (b) Calculate the loan outstanding exactly 11 years from today.

Answer 1

Outstanding balance of loan at the end of 11 year = $260.536

Explanation:

given data:

Lat smaller payment that made in 12 years from today = $270

Interest rate = 3.6 % per annum that compounded half yearly

Outstanding balance of loan at the end of 11 year can be calcualted as

`= (270)/([1 + (3.6)/(2)]^ 2)`

Outstanding balance of loan at the end of 11 year = $260.536