Question

A $10,000 loan is to be repaid at the rate of $200 per month, with an annual effective interest rate of 19.56% charged against the unpaid balance. What principal remains to be paid after the third payment

Answer 1

Answer:

The appropriate response will be "9847.74".

Explanation:

The given values are:

Effective interest rate

= 19.56%

Loan amount

= $10,000

Per month rate

= $200

Now,

⇒  $EAR = (1+\frac{r}{m})\times m - 1$

On substituting the values, we get

⇒  $19.56 = (1+ \frac{r}{12} )\times 12 - 1$

⇒  $(1.1956) ^ {12} = 1 + \frac{r}{12}$

⇒  $r = 18 \ percent$

Principal to be paid after the third payment will be:

= $10000- 50- 50.75 - 51.51$

= $9847.74$