A loan is repayable by a decreasing annuity payable annually in arrears for 20 years. The repayment at the end of the first year is $6,000 and subsequent repayments reduce by $200 each year. The repayments were calculated using an effective rate of interest of 9% per annum. (a) Calculate the original amount of the loan. (b) Immediately after the ninth payment of interest and capital, the interest rate on the outstanding loan is reduced to 7% per annum effective. Calculate the amount of the tenth payment if subsequent payments continue to be reduced by $200 each year, and the loan is to be repaid by the original date, i.e. 20 years from commencement.
A loan is repayable by a decreasing annuity payable annually in arrears for 20 years. The repayment at the end of the first year is $6,000 and subsequent repayments reduce by $200 each year. The repayments were calculated using an effective rate of interest of 9% per annum. (a) Calculate the original amount of the loan. (b) Immediately after the ninth payment of interest and capital, the interest rate on the outstanding loan is reduced to 7% per annum effective. Calculate the amount of the tenth payment if subsequent payments continue to be reduced by $200 each year, and the loan is to be repaid by the original date, i.e. 20 years from commencement.
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 17P
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![A loan is repayable by a decreasing annuity payable annually in
arrears for 20 years. The repayment at the end of the first year is
$6,000 and subsequent repayments reduce by $200 each year.
The repayments were calculated using an effective rate of interest
of 9% per annum.
(a)
Calculate the original amount of the loan.
(b)
Immediately after the ninth payment of interest and capital, the
interest rate on the outstanding loan is reduced to 7% per annum
effective. Calculate the amount of the tenth payment if subsequent
payments continue to be reduced by $200 each year, and the loan
is to be repaid by the original date, i.e. 20 years from
commencement.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1da9758b-be1e-4e9c-9bfd-f9832444dc27%2F3044d6ce-6d93-4f57-963f-41a7bd351995%2Fr5fonsk_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A loan is repayable by a decreasing annuity payable annually in
arrears for 20 years. The repayment at the end of the first year is
$6,000 and subsequent repayments reduce by $200 each year.
The repayments were calculated using an effective rate of interest
of 9% per annum.
(a)
Calculate the original amount of the loan.
(b)
Immediately after the ninth payment of interest and capital, the
interest rate on the outstanding loan is reduced to 7% per annum
effective. Calculate the amount of the tenth payment if subsequent
payments continue to be reduced by $200 each year, and the loan
is to be repaid by the original date, i.e. 20 years from
commencement.
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