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24 June, 12:32

Jenna is the beneficiary of a fund of 20,000 that pays her 1,000 at the end of each month. The fund earns 6% compounded monthly. The final payment to exhaust the fund will be a balloon payment. Calculate the amount of the balloon payment.

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  1. 24 June, 13:12
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    Given

    Fund Amount P=20000

    Payment each month A=1000

    Interest rate per month r=6%/12=0.5%

    Let B is balloon payment and N is the total number of Payment

    so P=A * (1 - (1+r) ^ - (N-1)) / r + B / (1+r) ^N

    20000=1000 * (1 - (1+0.5%) ^ (N-1)) / 0.5% + B / (1+0.5%) ^N

    By using the trial and error method we find that N=21

    So B / (1+0.5%) ^21=1012.53

    B=1124.39
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