Question

Assume you take out a loan that you will make payments, once per year, for four years. Complete the table assuming the loan is for $10,000 and the interest rate on the loan is 4.25%.

Year	Beginning Balance	Total Payment	Interest Paid	Principal Paid	Ending Balance
1
2
3
4

Answer 1

Year	Beginning Balance	Total Payment	Interest Paid	Principal Paid	Ending Balance
1	$          10,000.00	$         2,771.15	$         425.00	$        2,346.15	$           7,653.85
2	$ 7,653.85	$         2,771.15	$         325.29	$        2,445.86	$           5,207.99
3	$ 5,207.99	$         2,771.15	$         221.34	$        2,549.81	$           2,658.18
4	$ 2,658.18	$         2,771.15	$         112.97	$        2,658.18	$ -0.00
working:
	Annual payment		=	Loan Amount/Present Value of annuity of 1
			=	$           10,000	/	3.60861
			=	$        2,771.15
	Present Value of annuity of 1		=	(1-(1+i)^-n)/i		Where,
			=	(1-(1+0.0425)^-4)/0.0425		i	0.0425
			=	3.60861		n	4