Question

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Loan Amortization Schedule for Investment Interest rate Year Beginning Principal Principal Payment Interest Payment Ending principal...

Loan Amortization Schedule for Investment

Interest rate	Year	Beginning Principal	Principal Payment	Interest Payment	Ending principal	Tax Savings
0.07	1	15,000	a.	1,050	b.	c.
0.07	2
0.07	3
0.07	4
0.07	5
0.07

Fill in the blanks. Explain how to get the principal and ending principal.

Expert Solution

First you need to calculate the yearly payment

Present value of Annuity = A*[(1-(1+r)^-n)/r]

Where

A - Annuity payment = ?

r - rate per period = 7%

n - no. of periods = 5

15000 = A*[(1-1.07^-5)/.07]

= A*[(1-0.71298617948)/.07]

= A*4.100197436

A = 15000/4.100197436

= 3658.36

Year	Opening Balance	Total Payment	interest paid	principal paid	end balance
1	15,000.00	3,658.36	1,050.00	2,608.36	12,391.64
2	12,391.64	3,658.36	867.41	2,790.95	9,600.69
3	9,600.69	3,658.36	672.05	2,986.31	6,614.38
4	6,614.38	3,658.36	463.01	3,195.35	3,419.03
5	3,419.03	3,658.36	239.33	3,419.03	0.00

Interest paid = Opening Balance*7%

Principal paid = Total Payment - Interest paid

End balance = Opening Balance - Principal paid

jeff jeffy answered 2 years ago

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