Business, 28.08.2020 15:01 pearl264

Giovanna will be borrowing $150,000 today to open her own business, and she will pay it back with 20 yearly payments starting one year from today. If the effective annual interest rate is 8%, how much will the final payment be if the amount of principal reduced each year is constant

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Answer from: cody665

$8,100

Explanation:

Following is the table that will we used to compute last payment made:

Op, Principal Principal Repayment Interest Cl. Principal

1 150,000 7,500 12,000 142,500

2 142,500 7,500 11,400 135,000

3 135,000 7,500 10,800 127,500

4 127,500 7,500 10,200 120,000

5 120,000 7,500 9,600 112,500

6 112,500 7,500 9,000 105,000

7 105,000 7,500 8,400 97,500

8 97,500 7,500 7,800 90,000

9 90,000 7,500 7,200 82,500

10 82,500 7,500 6,600 75,000

11 75,000 7,500 6,000 67,500

12 67,500 7,500 5,400 60,000

13 60,000 7,500 4,800 52,500

14 52,500 7,500 4,200 45,000

15 45,000 7,500 3,600 37,500

16 37,500 7,500 3,000 30,000

17 30,000 7,500 2,400 22,500

18 22,500 7,500 1,800 15,000

19 15,000 7,500 1,200 7,500

20 7,500 7,500 600 -

Here

Closing Principal = Opening Principal - Principal Repayment

The last final payment would be:

Final Payment = Last Principal Repayment Amount + Last Interest Payment

Now the values from the above table are given as under:

Last Principal Repayment Amount is $7,500

Last Interest Payment is $600

By putting values in the above equation, we have:

Final Payment = $7,500 + $600 = $8,100

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