A small industrial contractor purchased a warehouse building for storing equipment and materials that are not immediately needed at construction job sites.
The cost of the building was $100.000, and the contractor made an agreement with the seller to finance the purchase over a 5-year period.
The agreement stated that monthly payments would be made based on a 30- year amortization, but the balance owed at the end of year 5 would be paid in a lump-sum balloon payment.
What was the size of the balloon payment if the interest rate on the loan was 6% per year, compounded monthly?