Question

A $200,000 loan amortized over 13 years at an interest rate of 10% per year requires payments of $21,215.85 to completely remove the loan when interest is charged on the unrecovered balance of the principal. If interest is charged on the original principal instead of the unrecovered balance, what is the loan balance after 13 years provided the same $21,215.85 payments are made each year

Answer 1

Loan amount = $184,193.95

Step-by-step explanation:

Interest will remain same each year. Interest per year = 200,000*10% = $20,000

Installment $21,215.85

Less: Interest $20,000

Payment to Principal $1,215.85

Total principal repaid in 13 years = $1,215.85 * 13 years = $15,806.05

So, the principal left = $200,000 - $15,806.05 = $184,193.95