Scott takes out a loan with 29 annual payments of $450 each. With the14th payment, Scott pays an extra $1,400, and then pays the balance in 8 years with revised annual payments. The annual effective interest rate is 11%.

Calculate the amount of the revised payment.

• $2,359.45
• $356.75
• $288.09
• $154.8
• $255.31

Hardiek, Aaron (June 2010). "Study Questions for Actuarial Exam 2/FM". digitalcommons.calpoly.edu. Retrieved November 20, 2023.

Solution: B

First find the amount of the outstanding balance after the 14th payment:

[[math]] 450 a_{\overline{15}|0.11} = 3235.89 [[/math]]

After the extra 1,400 the balance is: 3235.89 – 1400 = 1835.89. Thus the revised payments would be:

[[math]] 1835.89 = x a_{\overline{8}|0.11} \implies x = 356.75 [[/math]]

Hardiek, Aaron (June 2010). "Study Questions for Actuarial Exam 2/FM". digitalcommons.calpoly.edu. Retrieved November 20, 2023.