A loan has a term of 30 years. Payments are made at the end of each year. The in

Question

A loan has a term of 30 years. Payments are made at the end of each year. The interest rate is an annual effective rate of interest of 4.4%. The first payment is $1,085. Each successive payment is increased by $91. Find the amount of interest in the 12th payment. Hint: as this is an increasing payment pattern increasing by a constant amount, the formula Ik = X - Xvn-k will not work. You will have to look at the more general case of amount of interest in the kth payment. Give your answer to the nearest cent.

Please Show Work Not excel

Explanation / Answer

The 12th payment would be = 1085 + 91*(12-1) = 2086

Hence the interest earned in the 12th payment = 2086*(1+0.044)^(30-12) - 2086

= 2442.18

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