Question

If you borrowed $30,000 at 25% annual interest. You agreed to repay the loan with five equal annual payments.

How much of the total amount repaid is interest?

How much of the third annual payment is interest, and how much principal is there?

If you decided to pay off your loan after the third payment, how much will you pay?

please i want the result step by step by hand not using excel!

thanks in advance

Answer 1

1]	The loan amortization formula is:
	PMT = L*r*(1+r)^n/((1+r)^n-1), where
	PMT = Periodic payment [installment]
	L = Loan amount
	r = interest rate per year
	n = number of years
	Using the above formula the annual installment = 30000*0.25*1.25^5/(1.25^5-1) =	$                11,155
2]	Total amount paid = 11155*5 =	$                55,775
	Total amount paid as interest = 55,777.01-30000 =	$                25,775	Answer 1
3]	The loan amortization would be as given below:
	Year	Beginning Balance	Interest for the year	Installment paid	Payment of Principal	Ending Balance
	1	$                30,000	$            7,500	$          11,155	$             3,655	$         26,345
	2	$                26,345	$            6,586	$          11,155	$             4,569	$         21,776
	3	$                21,776	$            5,444	$          11,155	$             5,711	$         16,065
	4	$                16,065	$            4,016	$          11,155	$             7,139	$           8,927
	5	$                  8,927	$            2,232	$          11,155	$             8,923	$                  -
			$          25,778	$          55,775	$           29,997
4]	Interest in third installment	$                  5,444	Answer 2
	Principal in third installment	$                  5,711
5]	Amount to be repaid after 3rd Installment	$                16,065	Answer 3