SOLUTION: Rita borrows​ $4,500 from the bank at 9 percent annually compounded interest to be repaid in three equal annual installments. The interest paid in the third year is

Algebra ->  Finance -> SOLUTION: Rita borrows​ $4,500 from the bank at 9 percent annually compounded interest to be repaid in three equal annual installments. The interest paid in the third year is      Log On


   

Question 1124636: Rita borrows​ $4,500 from the bank at 9 percent annually compounded interest to be repaid in three equal annual installments. The interest paid in the third year is
Answer by Theo(13342) About Me  (Show Source):
You can put this solution on YOUR website!
i used the following online calculator.

https://arachnoid.com/finance/

this allowed me to determine what the payments needed to be at the end of each year.

the payments required at the end of each year are 1777.75.

the following spreadsheet shows the year by year calculations.

$$$

at end of year 1, the remaining balance of $4500 from the end of year 0 is multiplied by 9% to get the interest charge of $405.

this is added to the remaining balance of $4500 from the end of year 0 and then the annual payment of $1777.75 is subtracted from that to get the remaining balance of $3127.25 at the end of year 1.

at the end of year 3, the remaining balance of $1630.96 from the end of year 2 is multiplied by 9% to get the interest charge of $146.79.

this is added to the remaining balance of $1630.96 from the end of year 2 and then the annual payment of $1777.75 is subtracted from that to get the remaining balance of $0.00 at the end of year 3.

the loan is fully paid of by the end of year 3.

your solution is that the interest paid in the third year is $146.79.