Homework SourseYou have taken out a loan of 250000 in order to purchase new
You have taken out a loan of $250,000 in order to purchase new stage equipment for your music venue. The loan has an annual interest rate of 4.5% and will be paid back in 10 equal yearly installments at the end of each year. How much will you still owe at the end of year 2 / start of year 3?
Solution
The amount of loan taken = $250000
Interest rate = 4.5%
No. of equal yearly installment for loan payable = 10
Equal yearly installment = 250000 / PVAF(4.5% , 10)
= 250000 / 7.9127 = $31594.71 Annually
Answer is 208395.08
| Year | Opening Balance | Interest@4.5% | Installment | Principal Paid | Closing Balance | |
| 1 | 250000.00 | 11250.00 | 31594.71 | 20344.71 | 229655.29 | |
| 2 | 229655.29 | 10334.49 | 31594.71 | 21260.22 | 208395.08 | |
| 3 | 208395.08 |
