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Dear John,
Can you please explain while calculating the closing loan balance why they added the interest @ 8%.As the question states bond will be repaid on basis of fixed equal annual payment which constitutes of (interest and principle). So if the principle amount of loan is deducting as a repayment ,interest should also be deducting as repayment to find out closing loan balance.
Why interest is added here ? Doesnt make sence.
They are repaying interest and the principal by paying 9058 a year.
The total they repay is only more than the original loan because interest is being charged each year!!!
Every year interest will be added to the balance, regardless of how they end up repaying. If they waited till the end to reply the principal, then they would have to pay the interest that is charged each year.
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