A loan for $15,000 is taken out from a loan company that uses the sum of digits method.It is to be paid back over 15 years with semi-annual payments of $920.87 at j₂ = 9%.What is the outstanding balance of the loan after 16 payments?

Question

Quizplus · Accepted Answer

The sum of the digits of 15,000 is 1 + 5 + 0 + 0 = 6. The payment period is 15 years * 2 = 30 semi-annual periods. The outstanding balance after 16 payments is $15,000 * (1 + 0.09/2)^30 * (1 - (1 + 0.09/2)^-14) / (0.09/2) = $10,041.13.

A Loan for $15,000 Is Taken Out from a Loan