Question

Loan Amortization

Your company is planning to borrow $1.5 million on a 7-year, 8%, annual payment, fully amortized term loan. What fraction of the payment made at the end of the second year will represent repayment of principal? Round your answer to two decimal places.

Answer 1

INstalment = Loan / PVAF(r%, n)

= $ 1,500,000 / PVAF(8%, 7)

= $ 1,500,000 / 5.2064

= $ 288108.60

Loan Amortiaztion:

Year	Opeing Bal	Instalment	Int	Principal Repay	Closing Bal
1	$ 15,00,000.00	$ 2,88,108.60	$ 1,20,000.00	$ 1,68,108.60	$ 13,31,891.40
2	$ 13,31,891.40	$ 2,88,108.60	$ 1,06,551.31	$ 1,81,557.29	$ 11,50,334.11
3	$ 11,50,334.11	$ 2,88,108.60	$    92,026.73	$ 1,96,081.87	$   9,54,252.23
4	$   9,54,252.23	$ 2,88,108.60	$    76,340.18	$ 2,11,768.42	$   7,42,483.81
5	$   7,42,483.81	$ 2,88,108.60	$    59,398.70	$ 2,28,709.90	$   5,13,773.91
6	$   5,13,773.91	$ 2,88,108.60	$    41,101.91	$ 2,47,006.69	$   2,66,767.22
7	$   2,66,767.22	$ 2,88,108.60	$    21,341.38	$ 2,66,767.22	$               -0.00

Pricipay Repay for Year 2 is $ 181,557.29