A company in need of finance intends to borrow $10 000 on 3 January 2022. Compound interest at the rate of 12 % is added on the 2nd of January each year. The company proposes to repay the loan in 20 equal instalments on the 3rd of January each year, the first repayment being made on 3 January 2023. The task is to calculate the value of each instalment to the nearest whole number.
The company makes an average profit of $3324 per year and the director wishes to make a decision on whether they can take up the loan.
ACTIVITIES/TASK
You are required to
Come up with an expression for the amount of money owed at the end of the first year ie 2 January 2023. [3]
After the first repayment on 3 January 2023. [1]
After the end of the second year ie 2 January 2024. [3]
After the second repayment ie on 3 January 2024. [3]
Owed after the end of the 3rd year ie 2 January 2025. [4]
After the third repayment on 3 January 2025. [3]
Write a simplified expression for the debt after the 20th repayment. [3]
Determine the value of each instalment to be paid at the end of each year. [4]
Give the date when repayment is to be done. [2]
As the financial director make recommendations. [4]