Problem
A loan of 20; 000, made at an interest rate of 6%, is to be repaid by level yearly payments for 10 years, beginning 1 year after the loan is advanced. Just before making the seventh repayment, the borrower wishes to repay the entire loan.
(a) If interest rates remain unchanged, what is the outstanding balance?
(b) Suppose interest rates have dropped to 5%. How much will the borrower have to pay if
the lender uses the lower interest rate to calculate the outstanding balance?
Progress
I use the compound interest to calculate, but I can't get the expected answer. Anyone can help?