Calculating the Payment of an Ordinary Annuity
Calculating the Payment in an Ordinary Annuity
Lump Sum Payments. On September 1, 2007, Susan Chao bought a motorcycle for $25,000. She made a down payment of $1,000 and financed the balance with a five-year loan at a stated annual interest rate of 8.4%, compounded monthly. She began making monthly payments exactly one month after the purchase (i.e., on October 1, 2007). At the end of October 2009, Susan found a new job and decided to pay off the loan. If the bank charges a prepayment penalty of 1% based on the loan balance, how much will she owe the bank on November 1, 2009?
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