Julia Borrows Tk. 5,00,000 At A 12% Interest Rate To Be Paid Over The Next 6 Years. Payment Will Be Made In Equal Installments At The End Of Each Year

Julia borrows Tk. 5,00,000 at a 12% interest rate to be paid over the next 6 years. Payment will be made in equal installments at the end of each year

1. Annual Installment Calculation

To calculate the equal annual installment (), we use the Capital Recovery Factor (CRF) formula for present value of an ordinary annuity:

Given Data:

Principal Loan Amount (): Tk. 5,00,000
Annual Interest Rate (): 12% or 0.12
Number of Years (): 6 years

Step-by-Step Calculation:

Julia should pay Tk. 1,21,612.86 at the end of each year.

2. Loan Repayment Schedule (Capital Recovery Method)

Interest Paid =
Principal Repaid =
Ending Balance =

Year	Beginning Balance (Tk.)	Annual Installment (Tk.)	Interest Paid (12%) (Tk.)	Principal Repaid (Tk.)	Ending Balance (Tk.)
1	5,00,000.00	1,21,612.86	60,000.00	61,612.86	4,38,387.14
2	4,38,387.14	1,21,612.86	52,606.46	69,006.40	3,69,380.74
3	3,69,380.74	1,21,612.86	44,325.69	77,287.17	2,92,093.57
4	2,92,093.57	1,21,612.86	35,051.23	86,561.63	2,05,531.94
5	2,05,531.94	1,21,612.86	24,663.83	96,949.03	1,08,582.91
6	1,08,582.91	1,21,612.86	13,029.95	1,08,582.91	0.00
Total	—	7,29,677.16	2,29,677.16	5,00,000.00	—

Summary: Over 6 years, Julia pays a total of Tk. 7,29,677.16, where Tk. 5,00,000 goes toward principal repayment and Tk. 2,29,677.16 goes toward total interest.

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