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AAdmin
Nov 19'23

Exercise

A loan is amortized with level monthly payments at an annual effective interest rate of 10%. The amount of principal repaid in the 6th month is 500.

Calculate the principal repaid in the 30th month.

  • 500
  • 555
  • 605
  • 705
  • 805

Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.

AAdmin
Nov 19'23

Solution: C

Each month the principal paid increases by 1.11/12. Thus, the amount of principal paid increases to 500(1.11/12)30-6=5001.12=605.

Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.

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