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Your uncle borrows $60,000 from the bank at 10 percent interest over the seven-year life of the loan. a. What equal annual payments must be made to discharge the loan, plus pay the bank its required rate of interest

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Answer:

Payment = $60,000 ((1 - 1.1^(-7)) / .1)^-1 = 12,324.33

$60,000 x .1 = $6,000 of interest on first payment. $6,324.33 to principal.

Balance after 1 year = $60,000 + $6,000 - $12,324.33 = $53,675.67

Interest on 2nd payment = .1 x $53,675.67 = $5,356.57 and principal = $12,324.33 - $5,356.57

The equal annual payment that should be made for discharging the loan should be $12,324.38.

Given that,

  • The amount borrowed is $60,000.
  • The rate of interest is 10%.
  • The time period is 7 years.

Now the following calculation should be considered:

= $60,000 ÷ 4.8684

= $12,324.38

Therefore we can conclude that the equal annual payment that should be made for discharging the loan should be $12,324.38.

Learn more about the loan here: brainly.com/question/11794123

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