Please answer this question

Question

George is loaned $100,000 in Year 0. Approximately (round up to the nearest year) many years will it take him to pay off the loan at 4% interest if he pays down the loan by $10,000 in Year 1 and increases his payment by $1,000 in each year starting in Year 2?

Answer 1

Hell AAA,

George will pay off the remainder of his loan after his 9th payment. His 9th payment is for 18,000, but the remaining balance of his loan after the 8th year is 14,359. I solved this using an amortization table. Each payment first pays down that year's interest, and after it pays down the interest the rest of the payment is applied to the principal (similar to a home or a car loan).

Let me know if you have any other financial accounting questions!

Nick