Question

Imagine a company is evaluating taking a 20,000,000 loan at a 10% interest rate, with 2% principal mandatory amortization and a maturity of 10 years on January 1, 2020. Create the necessary schedule(s) for the company so that they can make a proper evaluation.

Answer 1

In order to prepare ammortization schedule we need to calculate the yearly annuity that we have to pay

Present Value Annuity = Annuity*{(1-(1/(1+rate of interest)^number of years))/rate of interest}

Where Present value annuity = 20,000,000$

Rate of Interest = 10%

Number of years = 10 years

It is given that 2% ,mandatory principal need to be ammortized.

20,000,000 = Annuity *{(1-(1/(1+10%)^10))/10%}

Annuity = 32,65,907.90$

Ammortization Table is as follows

Year	Beginning Balance	Interest	Principal	EMI	Ending Balance
1	20000000	2000000	₹ 12,54,907.90	₹ 32,54,907.90	₹ 1,87,45,092.10
2	₹ 1,87,45,092.10	1874509	₹ 13,80,398.69	₹ 32,54,907.90	₹ 1,73,64,693.41
3	₹ 1,73,64,693.41	1736469	₹ 15,18,438.56	₹ 32,54,907.90	₹ 1,58,46,254.86
4	₹ 1,58,46,254.86	1584625	₹ 16,70,282.41	₹ 32,54,907.90	₹ 1,41,75,972.45
5	₹ 1,41,75,972.45	1417597	₹ 18,37,310.65	₹ 32,54,907.90	₹ 1,23,38,661.79
6	₹ 1,23,38,661.79	1233866	₹ 20,21,041.72	₹ 32,54,907.90	₹ 1,03,17,620.08
7	₹ 1,03,17,620.08	1031762	₹ 22,23,145.89	₹ 32,54,907.90	₹ 80,94,474.19
8	₹ 80,94,474.19	809447.4	₹ 24,45,460.48	₹ 32,54,907.90	₹ 56,49,013.71
9	₹ 56,49,013.71	564901.4	₹ 26,90,006.53	₹ 32,54,907.90	₹ 29,59,007.18
10	₹ 29,59,007.18	295900.7	₹ 29,59,007.18	₹ 32,54,907.90	₹ -0.00

The principal repaid every year is more that 2% of loan amount.