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Answer :
The payments that will be enough to pay off the $10,000 as the total payment is greater than the principal amount borrowed ($10,000)
Given,
Principal (P) = $10,000
Interest rate (r) = 81% per year
The payment period is in years and given as 3 years.The cash flow is shown below:
3 Year CF 1 $1.940
In order to determine if the payments will be enough to pay off the $10,000, we need to calculate the total payments made over the 3-year period.
The total payment can be calculated using the following formula:
Total payment = P(1 + r)n - CF
(P = Principal, r = Interest rate, n = Number of years, CF = Cash flow)
Substituting the given values, we get:
Total payment = 10,000(1 + 0.81)³ - 1.94
Total payment = $37,684.09
Since the total payment is greater than the principal amount borrowed ($10,000), it can be concluded that the payments will be enough to pay off the $10,000.
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