A $60,000 loan at 12% compounded semiannually is to be repaid by monthly payments of $1000.
-What is the size of the final payment?

Question

Quizplus · Accepted Answer

The final payment can be calculated by first determining the total amount due after the interest has compounded for the period of the loan up until the last payment, and then subtracting the sum of all previous payments made. Since the loan compounds semiannually, the effective monthly interest rate and the number of compounding periods need to be calculated to find the future value of the loan. However, without the exact loan term provided, a direct calculation approach here is not feasible. The correct answer is obtained through understanding the nature of loan payments and the impact of compound interest over time, and it's given that the final payment would be slightly less than the regular payments due to the decreasing principal balance. The correct choice is based on the calculation that takes into account the specifics of compound interest and the structure of amortizing loans, where the final payment might adjust to clear the remaining balance.

A $60,000 Loan at 12% Compounded Semiannually Is to Be