Michelle takes out a loan. It must be repaid with level annual payments based on an annual coupon rate of 4%. The 6th payment consists of $960 in interest and $340 of principal.

Calculate the amount of interest paid in the 14th payment.

• 465.31
• 711.23
• 588.77
• 13.83
• 834.69

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

Solution: E

Payment= 960 +340=1300

Principal repaid grows by 1.04 with every payment.

Principal in 14th payment is:

340(1.04)⁸= 465.31

Interest Paid:

1300 – 465.31= 834.69

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