Financial Calculations
A small business borrows $10,000 from a bank. The interest rate is 0.4 percent per month. The business
repays the loan at a rate of $900 per month. What will be the monthly balance after each payment?
The recursive formula for finding the monthly balance remaining is:
f(0) = 10,000
The initial amount is $10,000. Interest is
f(n) = 1.004 . f(n-1) -900, n > 1
increasing the previous balance, while $920 is
subtracted from each monthly payment.
Complete this chart to show the monthly balance. When you are done, you will be able to check your answers.
Month
Balance
Month 1) $10,000.00
Month 2) 9,140.00
Month 3) 8,276.56
4)
5)
6)
7)
8)