Mrs. Smith borrowed $20,000 from Last National Bank. She will repay the loan with 5 annual payments and her interest rate is 14%. a) Find the amount of her annual payments. b) What is her loan balance after she has made her 3rd annual payment?

Question

Mrs. Smith borrowed $20,000 from Last National Bank.  She will repay the loan with 5 annual payments and her interest rate is 14%.  a) Find the amount of her annual payments.  b) What is her loan balance after she has made her 3rd annual payment?

drwls · Answer

Use the amortization tool at
http://www.bretwhissel.net/cgi-bin/amortize

The annual payment amount is 5825.67

There is also a formula you can use, but it is rather hard to memorize. You find it at
http://www.vertex42.com/ExcelArticles/amortization-calculation.html