Revision as of 00:58, 19 November 2023 by Admin (Created page with "A 25-year loan is being repaid with annual payments of 1300 at an annual effective rate of interest of 7%. The borrower pays an additional 2600 at the time of the 5th payment and wants to repay the remaining balance over 15 years. Calculate the revised annual payment. <ul class="mw-excansopts"><li>1054.58</li><li>1226.65</li><li>1300.00</li><li>1369.38</li><li>1512.12</li></ul> {{soacopyright | 2023 }}")
ABy Admin
Nov 19'23
Exercise
A 25-year loan is being repaid with annual payments of 1300 at an annual effective rate of interest of 7%. The borrower pays an additional 2600 at the time of the 5th payment and wants to repay the remaining balance over 15 years.
Calculate the revised annual payment.
- 1054.58
- 1226.65
- 1300.00
- 1369.38
- 1512.12
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.
ABy Admin
Nov 19'23
Solution: B
Just prior to the extra payment at time 5, the outstanding balance is
[[math]]
1300 a_{\overline{20}|0.07}=1300(10.5940) =13, 772.20.
[[/math]]
After the extra payment it is 11,172.20. Paying this off in 15 years requires annual payments of
[[math]]
11,172.20/a_{\overline{15}|0.07}=11,172.20 / 9.1079 = 1226.65.
[[/math]]
Copyright 2023 . The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.