A loan of 10,000 is being repaid by payments of 1,000 at the end of each quarter for as long as necessary, plus a drop payment. The annual nominal rate of interest on the loan is 16% convertible quarterly.

Calculate the amount of interest in the tenth payment.

• 112
• 146
• 179
• 233
• 281

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

Solution: B

Principal repaid in the first payment is 1000 – 10,000(0.04) = 600. Therefore, the principle repaid in the tenth payment is 9 600(1.04) 854= and the interest paid is 1000 – 854 = 146.

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