Question

four years ago, a person borrowed $10,000 at an intereate rate of 8% compounded annually and agreed to pay it back in equal payments over a ten-year period. This same person now wants to pay off the reaminaing amount of the loan. How much should this person pay

Answer 1

$5,063.95

Step-by-step explanation:

Missing word "Assume he has just made the fourth payment."

Borrowed Amount = $10,000

Interest rate (Compounded annually) = 8%

Number of Payments = 10

Calculating Monthly Payment using the MS-Excel PMT Function

Annual Payment = PMT(Rate, Nper, -PV)

Annual Payment = PMT(8%, 10, 10000)

Annual Payment = $1,490.30

Calculating Present Value of 4 payments using the MS-Excel PV Function

Present Value = PV(Rate, Nper, -PMT)

Present Value = PV(8%, 10, -1,490.30)

Present Value = $4,936.05

So, the remaining balance of borrowed amount he should pay is $5,063.95 ($10,000 - $4,936.05).