Question

sheridan service has a line of credit loan with the bank. the initial loan balance was $8000.00. payments of $3000.00 and $4000.00 were made after five months and seven months respectively. at the end of one year, sheridan service borrowed an additional $4500.00. eleven months later, the line of credit loan was converted into a collateral mortgage loan. what was he amount of the mortgage loan if the line of credit interest was 8% compounded monthly?

Answer 1

The amount of the collateral mortgage loan would require calculating the change in balance of the original $8,000 line of credit considering two payments and an additional borrowing, compounded monthly at 8% interest.

Step-by-step explanation:

To calculate the amount of the collateral mortgage loan, we need to account for the interest on the line of credit loan at 8% compounded monthly. The initial loan balance was $8,000.00, with payments of $3,000.00 after five months and $4,000.00 after seven months. An additional $4,500.00 was borrowed at the end of one year.

The line of credit's balance would increase monthly based on the interest, then decrease with each payment, and again increase with the additional borrowing of $4,500.

After all these changes to the balance, the final amount right before the conversion to a collateral mortgage loan would include the total accrued interest over the time the line of credit was active. This complex calculation involves applied monthly compound interest formulas to reflect each transaction and interest accumulation period.