A loan with a current value of 34,500 has a payment plan that starts with a...

A loan with a current value of 34,500 has a payment plan that starts with a high end of year payment that goes down by the same amount each year until the loan is paid off. Using an interest rate of 8.0% and the first year payment of 8200, calculated by how much the end of year payment will go down to pay off the loan after just 7 years. Note use the sign to show if the payment goes up or down as the plan may not

Expert Solution

Year	Opening Loan Balance	Interest rate	Interest amount (opening loan * Interest rate)	Installment (interest+Principal repayment)	Fixed Principal Repayment every year	Closing Balance (opening loan - principal repayment)
1	34500	8%	2760	8200	5440	29060
2	29060	8%	2324.8	(-)7764.8	5440	23620
3	23620	8%	1889.6	(-)7329.6	5440	18180
4	18180	8%	1454.4	(-)6894.4	5440	12740
5	12740	8%	1019.2	(-)6459.2	5440	7300
6	7300	8%	584	(-)6024	5440	1860
7	1860	8%	148.8	(-)2008.8	1860	0

In year 1 Interest amount is 34500 * 8% = 2760,Since first installment is 8200 the principal repayment is the balance i.e 8200 - 2760 = 5440 which remains the same every year until year 7 when balance principal is paid off.The installment amount is calculated by adding the principal and interest amount (for ex year 2 installment = 2324.8+5440=7764.8).The payment goes down every year.

(-) indicates payment goes down

ekkarill92 answered 2 years ago

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