The agreement is that it will pay 5.75% interest annually and it will pay off the loan in five equal installments at the end of each year. What will be the amount of the payments?

St. louis corporation borrows $50,000

The St. Louis Corporation will have to make five equal annual payments in order to pay off the loan of $50,000 borrowed from a financial institution with an interest rate of 5.75%. Each payment will include both principal and interest components; the total payment amount at the end of each year is calculated by multiplying the outstanding balance by both the nominal interest rate and one plus that same rate.

Using this formula, we can calculate that each payment for St. Louis Corporation’s loan will be $11,159 (rounded up). This means that over five years, they will pay back a total of $55,795 (rounded up); this includes both principal and interest paid on the loan.

The breakdown for these payments is as follows: In year 1, St. Louis Corporation will owe a payment of $11,159 which consists of principal repayment in the amount of $9,360 and an interest fee totaling $1,799; in year 2 they owe a payment of $10,840 consisting of principal repayment amounting to $8882 with an accompanying interest fee totaling $1758; in year 3 they owe a payment in the amount of 10,524 which comprises principal repayment totaling 8463 and an associated interest fee totaling 2061; in year 4 they owe 9962 consisting of principal repayment equal to 7064 along with 2998 worth of associated fees; And finally in year 5 they need only make their last installment equalling 5540 representing 4242 worth of principle repayments complimented by 1398 worth of applicable fees.