AJ takes out a small business loan of 15000 dollars at a nom

AJ takes out a small business loan of 15000 dollars at a nominal rate of interest of 10.6 percent convertible quarterly. One year later, he repays 3500 dollars. Two years after that, the bank wants to sell AJ\'s loan to another Institution. How much does AJ owe at that time?

Solution

P=$15000 and Rates (r) =10.6% quarterly

Interest for an year R = [1+(10.6%/4)]⁴ - 1 =[1.0265]⁴ - 1 =11.02%

After a year Total Interest = P*R*T= (15000*11.02)/100=$1653

Total Amount after 1st year =$16653 and he repays $3500

Now Amount is = $(16653-3500) = $13153

Considering Simple Interest for next 2 years

Total Interest for 2 year = (13153 * 2*11.02)/100 = $2898.92

AJ owes = $(13153 + 2898.92 )= $16051.92