Question

Consider a $35,000 loan to be repaid in equal installments at the end of each of the next 5 years. The interest rate is 6%.

Set up an amortization schedule for the loan. Round your answers to the nearest cent. Enter "0" if required

Year	Payment	Repayment Interest	Repayment of Principal	Balance
1	$	$	$	$
2	$	$	$	$
3	$	$	$	$
4	$	$	$	$
5	$	$	$	$
Total	$	$	$

How large must each annual payment be if the loan is for $70,000? Assume that the interest rate remains at 6% and that the loan is still paid off over 5 years. Round your answer to the nearest cent.
$  

How large must each payment be if the loan is for $70,000, the interest rate is 6%, and the loan is paid off in equal installments at the end of each of the next 10 years? This loan is for the same amount as the loan in part b, but the payments are spread out over twice as many periods. Round your answer to the nearest cent.
$  

Answer 1

1)
	Year	Payment	Repayment Interest	Repayment of Principal	Balance
	1	$   8,308.87	$             2,100	$      6,208.87	$ 28,791.13
	2	$   8,308.87	$             1,727	$      6,581.41	$ 22,209.72
	3	$   8,308.87	$             1,333	$      6,976.29	$ 15,233.43
	4	$   8,308.87	$                 914	$      7,394.87	$   7,838.56
	5	$   8,308.87	$                 470	$      7,838.56	$            0.00
	Total	$ 41,544.37	$       6,544.37	$    35,000.00
	Working:
a.	Present Value of annuity of 1		=	(1-(1+i)^-n)/i		Where,
			=	(1-(1+0.06)^-5)/0.06		i	6%
			=	4.21236		n	5
b.	Annual Payment		=	Loan Amount / Present Value of annuity of 1
			=	$          35,000	/	4.21236
			=	$      8,308.87
c.	Year	Beginning Balance		Interest Expense
	1	$ 35,000.00		$            2,100
	2	$ 28,791.13		$            1,727
	3	$ 22,209.72		$            1,333
	4	$ 15,233.43		$                914
	5	$   7,838.56		$                470
2)
	Annual Payment		$     16,617.75
	Working:
	Present Value of annuity of 1		=	(1-(1+i)^-n)/i		Where,
			=	(1-(1+0.06)^-5)/0.06		i	6%
			=	4.21236		n	5
	Annual Payment		=	Loan Amount / Present Value of annuity of 1
			=	$          70,000	/	4.21236
			=	$    16,617.75
3)
	Annual Payment		$       9,510.76
	Working:
	Present Value of annuity of 1		=	(1-(1+i)^-n)/i		Where,
			=	(1-(1+0.06)^-10)/0.06		i	6%
			=	7.36009		n	10
	Annual Payment		=	Loan Amount / Present Value of annuity of 1
			=	$          70,000	/	7.36009
			=	$      9,510.76