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You are taking out an $11,000 loan today at 7% compounded annually. You will pay back...

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Finance

You are taking out an $11,000 loan today at 7% compoundedannually. You will pay back the loan with 6 equal end-of-yearpayments.

How much interest will you owe in the third year?

How much will you owe the bank at the end of the third year?

Show necessary formulas to find equal payment, principalpayment, and interest payments.

Answer & Explanation Solved by verified expert
3.9 Ratings (529 Votes)
Amount borrowed 11000 Interest rate 7 Period 6 years Let annual payment be x 11000 x 107 x 1072 x 1076 11000 x 1 11076 007 11000 x 4766540 x 230775 Annual payment 230775 Year 1 Beginning loan outstanding 11000 Interest Paid 7 Beginning loan outstanding Interest    See Answer
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Transcribed Image Text

You are taking out an $11,000 loan today at 7% compoundedannually. You will pay back the loan with 6 equal end-of-yearpayments.How much interest will you owe in the third year?How much will you owe the bank at the end of the third year?Show necessary formulas to find equal payment, principalpayment, and interest payments.

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