Question

1. Construct an amortization schedule for a $1,000, 8% annual rate loan with 3 equal payments. The first payment will be made at the end of the1^st year. Find the required annual payments

A) $355.8

B) $367.2

C)$388.0

D)$390.7

2. Based on the information from Question 1, what’s the ending balance of the amortized loan at the end of the third year

A)$0

B)$349.7
C)$388.3

D)$692.0

3. Based on the information from Question 1 and 2, calculate the total amount of interests you should pay for the amortized loan in three years

A)$128.8

B)$145.4

C)$150.0

D)$164.1

Answer 1

1. C) $ 388.0

2. A) $ 0

3. D) $ 164.1

Working:

Step-1:Calculation of equal annual payment
Equal annual payment	=-pmt(rate,nper,pv,fv)
	= $       388.0
Where,
rate	=	8%
nper	=	3
pv	=	$       1,000
fv	=	0
Step-2:Preparation of amortization schedule
Year end	Beginning Loan	Annual Payment	Interest Expense	Principal repayment	Ending Loan
	a	b	c=a*8%	d=b-c	e=a-d
1	$   1,000.0	$       388.0	$       80.0	$    308.0	$    692.0
2	$       692.0	$       388.0	$       55.4	$    332.7	$    359.3
3	$       359.3	$       388.0	$       28.7	$    359.3	0
	Total	$   1,164.1	$    164.1	$ 1,000.0