Question

1. An amount of $200,000 is borrowed for 5 years at a rate of 12%. Make an amortization schedule showing the quarterly payment, the quarterly interest on the outstanding balance, the portion of the payment going toward reducing the debt, and the balance.

Please show every step and explanation.

Answer 1

Ans:

Calculation of quarterly payments:

Amount Borrowed : $200,000

Quarterly rate of interest: 12%/4 = 3%

Payment Period : 20 Quarters (5*4)

Annuity Factor @3% for 20 Periods : 1/(1.03)^1 + 1/(1.03)^2 + 1/(1.03)^3 +.....................+ 1/(1.03)^20 : 14.877475

Quarterly Installment Payment : $200,000/14.877475 = $13,443.14

Amortisation table

Quarter	Opening Principal Balance	Quarterly interest @3%	Installment Payment	Closing Pricipal Balance
1	$                       2,00,000.00	$                        6,000.00	$                13,443.14	$                  1,92,556.86
2	$                       1,92,556.86	$                        5,776.71	$                13,443.14	$                  1,84,890.43
3	$                       1,84,890.43	$                        5,546.71	$                13,443.14	$                  1,76,994.00
4	$                       1,76,994.00	$                        5,309.82	$                13,443.14	$                  1,68,860.68
5	$                       1,68,860.68	$                        5,065.82	$                13,443.14	$                  1,60,483.36
6	$                       1,60,483.36	$                        4,814.50	$                13,443.14	$                  1,51,854.72
7	$                       1,51,854.72	$                        4,555.64	$                13,443.14	$                  1,42,967.22
8	$                       1,42,967.22	$                        4,289.02	$                13,443.14	$                  1,33,813.10
9	$                       1,33,813.10	$                        4,014.39	$                13,443.14	$                  1,24,384.35
10	$                       1,24,384.35	$                        3,731.53	$                13,443.14	$                  1,14,672.74
11	$                       1,14,672.74	$                        3,440.18	$                13,443.14	$                  1,04,669.78
12	$                       1,04,669.78	$                        3,140.09	$                13,443.14	$                     94,366.74
13	$                          94,366.74	$                        2,831.00	$                13,443.14	$                     83,754.60
14	$                          83,754.60	$                        2,512.64	$                13,443.14	$                     72,824.10
15	$                          72,824.10	$                        2,184.72	$                13,443.14	$                     61,565.68
16	$                          61,565.68	$                        1,846.97	$                13,443.14	$                     49,969.51
17	$                          49,969.51	$                        1,499.09	$                13,443.14	$                     38,025.46
18	$                          38,025.46	$                        1,140.76	$                13,443.14	$                     25,723.08
19	$                          25,723.08	$                           771.69	$                13,443.14	$                     13,051.63
20	$                          13,051.63	$                           391.55	$                13,443.14	$                               0.04

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