Answer:
A) $44,435
Explanation:
You want to know the amount of the last payment on a loan of $150,000 at 7% for 5 years, if annual payments increase at 10% per year.
Amortization
No doubt there is a formula for balloon scale payment amounts, but we haven't found it and don't feel inclined to derive it. Hence, we have solved this problem using the "goal seek" capability of a spreadsheet.
Formulating the spreadsheet to calculate interest at 7% per year and payment amounts increasing at 10% per year, the solver found that the final payment amount would be $44,435.
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Additional comment
This can be approximated by finding the annual payment assuming the loan is paid with constant payments. If this is considered to be the payment in the middle (3rd) year, then the final payment will be 1.10² times that amount, about 45,300. This estimate is sufficient to identify the correct answer choice among those offered. The calculation is shown in the second attachment.
(For longer loans, a different estimation method may be required.)
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