A person borrows 100 to be repaid in 8 years with 11 annuall

A person borrows ?$100 to be repaid in 8 years with 11?% annually compounded interest. The loan may be repaid at the end of any earlier year with no prepayment penalty. a.??What amount will be due if the loan is repaid at the end of year 1?? b.??What is the repayment at the end of year 4?? c.??What amount is due at the end of the eighth ?year?

Solution

a. Amount due at the end of year 1 = 100 * 1.11 = 111

b. amount due at the end of year 4 = 100*(1.11⁴) = 151.81

amount due at the end of year 8 = 100*(1.11⁸) = 230.45