Question

Lou lewis borrows $10,000 to be completely repaid over 10 years at 8%. repayment of principal in the first year is ______.

Answer 1

This is the concept of time value of money. To calculate the future value of the amount borrowed by Lewis we proceed as follows:
A=P(1+r/100)^n

A=amount in future
P=principle
r=rate
n=time
Thus;

A=10000(1+8/100)^1
A=10000(1.08)^1
A=$10,800
Therefore the repayment after the first year will be:
10800-10000
=$800