Simple interest question
A loan agreement originally called for a payment of 2,375 after 4 months. Unfortunately, the paymen?
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- 3+ months ago by mariam Ch...
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- simple, after, interest, question, month, loans, payment
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Added 3+ months ago:
A loan agreement originally called for a payment of 2,375 after 4 months. Unfortunately, the payment was missed and the debtor has proposed a new agreement.
The new agreement calls for an immediate payment of $1,000 today (6 month mark) followed by the remainder (final payment) at the 12 month mark. Calculate the amount of the final payment assuming a simple interest rate of 5.25%.
Answers (1)
Well, if $1000 is paid off, that leaves $1,375 plus 6 months interest. An interest rate if 5.25% equals a factor of 1.0525 per year. To work this out for six months, you need the square root of this (1.0259 or 2.59%). Adding 2.59% twice (2 x 6 months) would be like adding 5.25%. Adding it once does the trick for six months, though. So the final payment is $1,375 + 2.59% which ends up as $1,410.61.