A loan of $20,000 is to be amortized in 10 level annual payments. The interest
rate for the first 3 years is 4% while the interest rate for the subsequent 7
years is 6%. Calculate the loan balance B₆ by
(a) the prospective method,
(b) the retrospective method.
Hence find the interest portion in the 7th annual payment.

Answer rating: 100% (QA)

a Prospective method For the prospective method we calculate the annual payment using the interest r... View the full answer