If you borrowed 24000 at 6% annual interest. You agreed to repay the loan with five...

If you borrowed 24000 at 6% annual interest. You agreed to repay the loan with five equal annual payments. How much of the total amount repaid is interest? How much of the third annual payment is interest, and how much principal is there? If you decided to pay off your loan after the third payment, how much will you pay?

Solutions

Expert Solution

=> First we have to create the loan amortization in excel, so that we can easily answer all the questions.

Formula used in excel:

=> Now we will come to the answers of the questions:

* How much of the total amount repaid is interest?

In the 1st table, we can see the sum of interest portion = $ 4,487.57

* How much of the third annual payment is interest, and how much principal is there?

In the 1st table, Interest payment = $ 913.77 and principal = $ 4,783.74 in the third annual payment

* If you decided to pay off your loan after the third payment, how much will you pay?

In the 1st table, we can see that the balance amount left after third payment is $10,445.78

If we decide to payoff the loan after third payment then we have to pay the principal of $ 10,445.78 and interest of 6% on it.

Interest = 6% of 10,445.78 = $ 626.75.

Therefore, a total of $ 10,445.78 + $ 626.75 = $ 11,082.53

jeff jeffy answered 1 year ago

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