A loan is to be repaid in level installments payable at the

A loan is to be repaid in level installments payable at the end of each year for 7 years. The effective annual interest rate on the loan is 4%. After the 4,h payment the principal remaining is $5000. Find the amount of the loan.

Solution

Loan amount = ?

Interest rate = 4%

Tenure = 7 years

After 4th payment principal 5000

Hence principal to be repaid in next 3 years = 5000

Yearly instalment = 5000/3

Hence total loan = 5000/3 (7) = 11666.67