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Old 03-27-2019, 11:02 PM
Sullinator Sullinator is offline
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Jan takes out 2 loans:

One for 25,000 at a 6% annual effective interest rate

One for 75000 at a 9% annual effective interest rate

Jan makes annual payments of 14,000 beginning one year after she takes out the loans. She pays only interest on the 25,000 loan until the 75,0000 loan is paid off.

Determine the total outstanding balance on both loans immediately after the 10th payment.

Iím the TIA they have it so 14000-1500 for payment for 75,000. I feel like they are making up random stuff itís not making any sense. Why is the answer 12,640.65? How do they magically come up with that?
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Old 03-27-2019, 11:28 PM
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Hints: you need n full payments of $12,500 to pay off the $75,000 loan and a small drop payment. The $25,000 will still be due at time n. There will be a small drop payment at time n+1.
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Old 03-27-2019, 11:30 PM
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For the first several years, they are paying the interest on the 25,000 loan (1500) and the balance of the 14000 (12500) is paid toward the 75,000 loan.

Note that the unpaid balance on the 25,000 loan remains at 25,000 since interest is being paid but nothing toward principal.

a. So how much of the 75,000 loan is unpaid at the end of 9 years?
b. How much is needed to finish paying off the rest of the 75,000 loan in year 10. (call that X).
c. That means they pay 14000-X on the 25,000 loan. So how much is unpaid after that payment at the end of year 10. Ans 12,640.65

Sort of ninja'd by Breadmaker
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Old 03-27-2019, 11:56 PM
Sullinator Sullinator is offline
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Quote:
Originally Posted by Gandalf View Post
For the first several years, they are paying the interest on the 25,000 loan (1500) and the balance of the 14000 (12500) is paid toward the 75,000 loan.

Note that the unpaid balance on the 25,000 loan remains at 25,000 since interest is being paid but nothing toward principal.

a. So how much of the 75,000 loan is unpaid at the end of 9 years?
b. How much is needed to finish paying off the rest of the 75,000 loan in year 10. (call that X).
c. That means they pay 14000-X on the 25,000 loan. So how much is unpaid after that payment at the end of year 10. Ans 12,640.65

Sort of ninja'd by Breadmaker
Doesnít the 75000 loan last until 10 years because you have 140.65 payment at time 10?
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Old 03-28-2019, 12:11 AM
Sullinator Sullinator is offline
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Nvm I did it different I did 75000(1.09)^10-12500s-angle9*(1.09)-140.65 which is 0.
Then I did 25000(1.06)^10-1500s-angle9*(1.06)-(1400-140.65)=12640.66
Added those up and got 12640.66.
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