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**Monox D. I-Fly****Member**- From: Indonesia
- Registered: 2015-12-02
- Posts: 1,565

Mr. Budi borrows 2,000,000IDR which will be amortized with 10 annuities. The first annuity will be paid in 1 year with 10% per year interest. Make the installment plan!

For the annuity I got A =

( is a geometric sequence with the first term and ratio )

= = = 2,000,000 × 0.61445671 = 1,228,913.42

Thus, the annuity is 1,228,913.42.

On the end of first year:

Annuity = 1,228,913.42IDR

Interest : 10% × 2,000,000IDR = 200,000IDR

Installment : 1,228,913.42IDR – 200.000IDR = 1,028,913.42IDR

Remaining loan : 2,000,000IDR – 1,028,913.42IDR = 971,086.58IDR

On the end of second year:

Annuity = 1,228,913.42IDR

Interest : 10% × 971,086.58IDR = 97,108.66IDR

Installment : 1,228,913.42IDR – 97,108.66IDR = 1,131,804.76IDR

Remaining loan : 971,086.58IDR – 1,131,804.76IDR = -159.718,58IDR

Why am I seeing negatives already?

*Last edited by Monox D. I-Fly (2018-05-15 21:40:24)*

Actually I never watch Star Wars and not interested in it anyway, but I choose a Yoda card as my avatar in honor of our great friend bobbym who has passed away. May his adventurous soul rest in peace at heaven.

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**bob bundy****Administrator**- Registered: 2010-06-20
- Posts: 8,508

hi Monox D. I-Fly

I notice no one has answered this yet. Maybe this post will 'bump it' to someone's attention. In case not:

I don't know about using annuities for borrowing purposes so I cannot at the moment understand what you are doing here. But it's still possible we can work together to a solution. I have done this in the past. The poster explains more about what they are doing and then I can understand enough to make a contribution. Together we may get there

Here's what I do understand.

(1) If you borrow money you have to pay it back with interest. I cannot see what the rate for this would be in your question.

(2) If you invest money (usually for retirement) in an annuity, you pay regular amounts and the value accumulates because of this and interest earned. (at 10% ??)

(3) You want the ten year annuity value to be equal to the ten year amount owed for the loan so it can be paid off.

Please let me know if I'm correct so far.

Bob

Children are not defined by school ...........The Fonz

You cannot teach a man anything; you can only help him find it within himself..........Galileo Galilei

Sometimes I deliberately make mistakes, just to test you! …………….Bob Bundy

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