A debt of $17500 is repaid by payments of $2850 made at the end of each...

A debt of $17500 is repaid by payments of $2850 made at the end of each year. Interest is 8% compounded semi-annually.

a) How many payments are needed to repay the debt?

b) What is the cost of the debt for the first three years?

c) What is the principle repaid in the fifth year?

d) Construct an amortization schedule showing details of the first three payments, the last three payments, and totals.

Expert Solution

1,The Loan will be repaid in 9 years

2,Cost of Debt for first year=(Total interest /Total debt)*100=(700+728)17500*100=8.16%

Cost of Debt for second year+(643.12+668.84)/16078*100=8.16%

Cost of debt for Year 3=((581.60+604.86)/14539.96*100=8.16%

3.Out of Total payment of $2850 ,principal amount for year 5 is $1946.11

4.Amortising table is given below:-

YEAR	OPENING PRINCIPAL	INTEREST @4 %	PRINCIPAL+INTEREST	REPAYMENTS	PRICIPAL AMOUNT	CLOSING PRINCIPAL
0.5	$ 17,500.00	$ 700.00	$ 18,200.00	$ -		$ 18,200.00
1	$ 18,200.00	$ 728.00	$ 18,928.00	$ 2,850.00	$ 1,422.00	$ 16,078.00
1.5	$ 16,078.00	$ 643.12	$ 16,721.12			$ 16,721.12
2	$ 16,721.12	$ 668.84	$ 17,389.96	$ 2,850.00	$ 1,538.04	$ 14,539.96
2.5	$ 14,539.96	$ 581.60	$ 15,121.56			$ 15,121.56
3	$ 15,121.56	$ 604.86	$ 15,726.43	$ 2,850.00	$ 1,663.54	$ 12,876.43
3.5	$ 12,876.43	$ 515.06	$ 13,391.48			$ 13,391.48
4	$ 13,391.48	$ 535.66	$ 13,927.14	$ 2,850.00	$ 1,799.28	$ 11,077.14
4.5	$ 11,077.14	$ 443.09	$ 11,520.23			$ 11,520.23
5	$ 11,520.23	$ 460.81	$ 11,981.04	$ 2,850.00	$ 1,946.11	$ 9,131.04
5.5	$ 9,131.04	$ 365.24	$ 9,496.28			$ 9,496.28
6	$ 9,496.28	$ 379.85	$ 9,876.13	$ 2,850.00	$ 2,104.91	$ 7,026.13
6.5	$ 7,026.13	$ 281.05	$ 7,307.17			$ 7,307.17
7	$ 7,307.17	$ 292.29	$ 7,599.46	$ 2,850.00	$ 2,276.67	$ 4,749.46
7.5	$ 4,749.46	$ 189.98	$ 4,939.44			$ 4,939.44
8	$ 4,939.44	$ 197.58	$ 5,137.02	$ 2,850.00	$ 2,462.44	$ 2,287.02
8.5	$ 2,287.02	$ 91.48	$ 2,378.50			$ 2,378.50
9	$ 2,378.50	$ 95.14	$ 2,473.64	$ 2,474.00	$ 2,287.38	$ (0.36)

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