A loan of 5000 with interest at 5% per annum effective, will be repaid by payments of 1000 each made at the end of each of the first, second, third, and fourth years and a larger amount sufficient to retire the loan at the end of the fifth year. Find the amount payable at the end of the fifth year.

• 1856
• 1213
• 1617
• 1315
• 1380

References

Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.

Solution: A

The outstanding balance at the end of the fourth year is [math]B=5000(1.05)^4-1000 s_{\overline{4} \mid}=1767.40625[/math] The payment in the fifth year must be [math]B(1+i)=[/math] [math]1767.40625(1.05)=1855.78[/math]

References

Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.