Amortization with Equal Payments. Prepare an amortization schedule for a three-year loan of $57,000. The interest...

Amortization with Equal Payments. Prepare an amortization schedule for a three-year loan of $57,000. The interest rate is 8 percent per year, and the loan calls for equal annual payments. How much interest is paid in the third year? How much total interest is paid over the life of the loan?

Expert Solution

Year	Payment	Interest portion	Principal portion	Loan balance
0	-	-	-	$57,000.00
1	$22,117.91	$4,560.00	$17,557.91	$39,442.09
2	$22,117.91	$3,155.37	$18,962.54	$20,479.55
3	$22,117.91	$1,638.36	$20,479.55	$0.00
Total	$66,353.73	$9,353.73	$57,000.00

Therefore, interest paid in the third year is $1,638.36 and total interest paid over the life of the loan is $9,353.73

Excel formulas:

If you want to find yearly payment without using excel, refer the following:

We can use the present value of the annuity formula to find the monthly payment:

Where,
PVA = Present value of the annuity
A = Annuity or payment
i = Interest rate in decimal form
n = Number of years

jeff jeffy answered 2 years ago

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