Question

In: Accounting

Problem 3 Ms. Lisa has recently joined PT KFC as staff in the finance team. Although...

Problem 3

Ms. Lisa has recently joined PT KFC as staff in the finance team. Although still relatively young, she is already very mature in managing her own financial matters. She has already developed a solid plan to cover for her long term financial needs. She is confident that by following her plan she will not be worried of her future financial condition during her old age.

Ms. Lisa borrowed $90,000 for her own business loan from her colleague and she must repay him at 4% annual rate of interest. She should repay her loan for the next 5 years. The loan is amortized into five equal, end-of-year payments.

  1. Calculate the annual, end-of-year loan payment.
  2. Prepare an amortization schedule showing the interest and principal breakdown of each loan payments.

Solutions

Expert Solution

Annual loan payment = Loan Amount/Present value annuity factor

= 90,000/PVAF(4%, 5 years)

= 90,000/4.451822

= $20,216.44

Amortization Schedule
Year Beginning Balance Interest Amount Annual payment Principal Repaid Closing Principal
1                90,000.00               3,600.00             20,216.44            16,616.44            73,383.56
2                73,383.56               2,935.34             20,216.44            17,281.10            56,102.46
3                56,102.46               2,244.10             20,216.44            17,972.34            38,130.12
4                38,130.12               1,525.20             20,216.44            18,691.24            19,438.89
5                19,438.89                  777.56             20,216.44            19,438.88                      0.00

ekkarill92 answered 3 months ago
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