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Hi John,
Concerning the interest to be paid, it says that the interest would be paid on the outstanding balance at the start of each year.
For Proteus Co, ONLY the cash payment of $3,000 was used to derive the loan amount outstanding at start of the year but in Bento Co, the interest rate coupled with the annuity payment($9,058) was used to derive the loan outstanding at the start of each year. Why was it calculated differently? Thank you.In Proteus the question specifically says that the repayment will be 3,000 each year. The interest is calculated each year on the balance outstanding at the start of each year.
In Bento the question says that the repayments are equal amounts that include interest and so to get the equal amount repaid we need to divide by the annuity factor as normal.
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