William Chris opened a steak house a few years ago with his sister, Ruth. In goi

Question

William Chris opened a steak house a few years ago with his sister, Ruth. In going through their financial records they found an old amortization schedule that their lender had prepared when they took out a loan to start the business. Unfortunately, the amortization schedule had A-1 Sauce, Worcestershire Sauce, and other condiments spilled all over it. The only thing that William and Ruth could make out was that original term of the loan was twenty years, the APR was 4.8%, and the balance after eight full years was $177,332.22. Not being too financially astute (nor having either good memories or good records), they ask you to determine (a) their monthly payment; (b) the amount they originally borrowed; and (c) the amount of interest they paid in the loan

Explanation / Answer

Let the monthly payment be x After 8 years, 12 years remaining 177332.22 = x/(1+4.8%/12)^1 + x/(1+4.8%/12)^2 ...............x/(1+4.8%/12)^144 x= $1622.39 Monthly payment =$1622.39 b. amount originally borrowed = x/(1+4.8%/12)^1 + x/(1+4.8%/12)^2 ...............x/(1+4.8%/12)^240 =$2,49,999.43

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