A loan of 4000 has an annual effective interest rate of 5%. The loan is repaid by payments of 250 at the end of each year for ten years along with a final balloon payment at the end of the eleventh year.

Calculate the outstanding loan balance at the beginning of the seventh year.

• 3593
• 3660
• 3790
• 3856
• 3910

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

Solution: B

Using the retrospective method:

[[math]] \begin{array}{c}{{4000(1.05)^{6}-250s_{\overline{6}|0.05}}}\\ {{5360.38-1700.48=3659.90}}\end{array} [[/math]]

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