hi can somebody please explain the solution to this question from 2008 paper 1 c. In particular where has the 2.04 come from?
Walter wishes to pay off his loan in equal instalments at the end of the first
and second year. The rate remains at 4% per annum compound interest.
How much would he need to repay, at the end of each year, to clear his
loan after two years? Give your answer correct to the nearest cent.
Let the equal instalment be x
P Year 1 = €5000
P Year 2 = €5000 × 1·04 - x = €5200 -x
P Year 3 = (€5200 -x) × 1·04 = x Final payment
(€5200 - x) x 1·04 = x
€5408 - 1.04x = x
€5408 = 2.04x
x = €5408/ 2.04 = €2650.98