At this time you are expected to pay the balance of the loan in the balloon payment shown above. Don't panic! Usually the loan is refinanced for another year. But beware-you may have to pay a higher interest rate for the next year,
a. Find the monthly payment for a $2,500 loan at 12% interest for one year, extended over a three-year period with a balloon payment at the end of the first year.
b. What is the amount of the final balloon payment for a $ 1,000 loan at 10% interest for one year, extended over five years?
c. You need a loan of $5,000 at 10% interest for one year. What is the amount of the monthly payment?
d. Compare the monthly payment and final balloon payment of the loan in part c if the loan is extended over two years.