Consider a 100,000 bank loan at 10 per cent per year, repayable in equal annual instalments over

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Consider a £100,000 bank loan at 10 per cent per year, repayable in equal annual instalments over five years. The annual repayment can be found by dividing the amount of the loan by the cumulative present value factor for five years at 10 per cent:

Annual repayment = 100,000/3.791= £26,378.26

Table 5.2 Interest elements of loan repayments Year 1 2 3 45 5 Opening balance () 100,000 83,621.74 65,605.65

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