A $200,000 loan amortized over 12 years at an interest rate of 10% per year requires payments of $21,215.85 to completely remove the loan when interest is charged on the unrecovered balance of the principal. If interest is charged on the original principal instead of the unrecovered balance, what is the loan balance after 12 years provided the same $21,215.85 payments are made each year?

The loan balance after twelve years  is $185409.80

This can be calculated as:

Loan amount                                   =  $200000

Add interest for 12 years

$200000*10%*12                             =$240000

Less repayment for 12 years

$21215.85*12                                     =($$254,590.20 )

Loan unrecovered balance              =$185,409.80

Explanation:

An alternative way to compute the loan unrecovered balance is found in attached spreadsheet.

Please note that fixed amount of $21215.85 is payable yearly,hence th principal portion is fixed throughout.

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