Suppose you borrowed $15,000 at a rate of 9% and must repay it in 5 equal installments at the end of each of the next 5 years. What is the outstanding balance of the loan at the end of second year?

Answer 1

First find the payment using:
Present Value = payment (1 - (1+i)^-n)/i
where i is the rate expressed as a decimal , i = .09, and n is the number of interest periods. n = 5

outstanding balance after 2 years
= 15000(1.09)^2 - payment( 1.09^2 - 1)/.09

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