Question

Barandon wants to borrow $10000 to purchase a motor bikes.He's going to repay the loan by making equal annual payments for five years with 14% interest per year on the loan.you need to prepare an amortiation schedule for the loan and how much total ionterest will brandon have to pay over the life of the loan?

step by step with formula please.....

Answer 1

Given Brandon need to borrow the dollars of amount $10,0000 to purchase a motor bike.

Time he's going to pay back is 5 years with 14% interest per year.

We're asked to prepare an Amortization Schedule, we'll make use of the Excel Spreadsheet , the formulas and the calculations are shown separately as shown in the below for your clarity.

Also explanation can be found underneath the solutions.

We've calculated the Payment by using the formula =PMT(AnnualInterestRate/PaymentsPerYear,Years*PaymentsPerYear,Amount)

Now we know the Payment is -$232.68.

We'll calculate Principal as below screenshot:

We've calculated the Principal by using the formula =PPMT(AnnualInterestRate/PaymentsPerYear,PaymentNumber,Years*PaymentsPerYear,Amount)

We've used PPMT Function to derive the value of Principal ie., -$116.02

Now, we'll calculate Interest as shown in the below screenshot:

The Formula applied is =IPMT(AnnualInterestRate/PaymentsPerYear,PaymentNumber,Years*PaymentsPerYear,Amount)

We us IPMT Function in the Excel and we've got Interest to pay such as -$116.67

We then add the Balance of $10,000 with the first year's Principal to get the Balance amount as shown below:

We get the values such as:

Now, we need to know how many years it would take to pay this loan off, for that we'd drag the cells as below to arrive the last payment,

We'd get the number of payment number as 43 months to pay as per the below screenshot:

We see and learn that it'll take 43 months to payback the loan along with the interest summed to purchase motor bike. Above is called as Amortization Table.

Total interest , we'll sum up the whole 43 months of Interest we'd get $3574.60 to be paid.