Question

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.

Answer 1

Answer:

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