Question

1. a) Ali obtained a Kshs. 500,000 loan payable over 8 year period amortized at 12% interest with annual payments. Prepare a loan amortization schedule showing the loan balances at the end of the year under constant payment Amortization.

b) A mortgage creates a right of security interest in the real property for the lender. What are the requirements from the lenders for valid mortgage contracts?

Answer 1

Ans 1)

		P =	Regular Payments
		PV =	Loan Amount
		r =	rate of interest
		n =	no of periods
		P =	r (PV)
			1 - (1 + r )-n
		P =	(12%/12)*500000
			1 - (1 / (1 + 12%/12)^96))
		P =	5000
			0.61527703
		P =	8126.42
	Beginning Balance	Interest	Principal	Ending Balance
1	$500,000.00	$5,000.00	$3,126.42	$496,873.58
2	$496,873.58	$4,968.74	$3,157.68	$493,715.89
3	$493,715.89	$4,937.16	$3,189.26	$490,526.63
4	$490,526.63	$4,905.27	$3,221.15	$487,305.48
5	$487,305.48	$4,873.05	$3,253.37	$484,052.11
6	$484,052.11	$4,840.52	$3,285.90	$480,766.21
7	$480,766.21	$4,807.66	$3,318.76	$477,447.45
8	$477,447.45	$4,774.47	$3,351.95	$474,095.51
9	$474,095.51	$4,740.96	$3,385.47	$470,710.04
10	$470,710.04	$4,707.10	$3,419.32	$467,290.72
11	$467,290.72	$4,672.91	$3,453.51	$463,837.21
12	$463,837.21	$4,638.37	$3,488.05	$460,349.16
Year #1 End
13	$460,349.16	$4,603.49	$3,522.93	$456,826.23
14	$456,826.23	$4,568.26	$3,558.16	$453,268.07
15	$453,268.07	$4,532.68	$3,593.74	$449,674.33
16	$449,674.33	$4,496.74	$3,629.68	$446,044.65
17	$446,044.65	$4,460.45	$3,665.97	$442,378.68
18	$442,378.68	$4,423.79	$3,702.63	$438,676.05
19	$438,676.05	$4,386.76	$3,739.66	$434,936.39
20	$434,936.39	$4,349.36	$3,777.06	$431,159.33
21	$431,159.33	$4,311.59	$3,814.83	$427,344.50
22	$427,344.50	$4,273.45	$3,852.98	$423,491.53
23	$423,491.53	$4,234.92	$3,891.51	$419,600.02
24	$419,600.02	$4,196.00	$3,930.42	$415,669.60
Year #2 End
25	$415,669.60	$4,156.70	$3,969.72	$411,699.88
26	$411,699.88	$4,117.00	$4,009.42	$407,690.45
27	$407,690.45	$4,076.90	$4,049.52	$403,640.94
28	$403,640.94	$4,036.41	$4,090.01	$399,550.93
29	$399,550.93	$3,995.51	$4,130.91	$395,420.02
30	$395,420.02	$3,954.20	$4,172.22	$391,247.79
31	$391,247.79	$3,912.48	$4,213.94	$387,033.85
32	$387,033.85	$3,870.34	$4,256.08	$382,777.77
33	$382,777.77	$3,827.78	$4,298.64	$378,479.13
34	$378,479.13	$3,784.79	$4,341.63	$374,137.50
35	$374,137.50	$3,741.37	$4,385.05	$369,752.45
36	$369,752.45	$3,697.52	$4,428.90	$365,323.56
Year #3 End
37	$365,323.56	$3,653.24	$4,473.19	$360,850.37
38	$360,850.37	$3,608.50	$4,517.92	$356,332.45
39	$356,332.45	$3,563.32	$4,563.10	$351,769.36
40	$351,769.36	$3,517.69	$4,608.73	$347,160.63
41	$347,160.63	$3,471.61	$4,654.81	$342,505.82
42	$342,505.82	$3,425.06	$4,701.36	$337,804.45
43	$337,804.45	$3,378.04	$4,748.38	$333,056.08
44	$333,056.08	$3,330.56	$4,795.86	$328,260.22
45	$328,260.22	$3,282.60	$4,843.82	$323,416.40
46	$323,416.40	$3,234.16	$4,892.26	$318,524.14
47	$318,524.14	$3,185.24	$4,941.18	$313,582.96
48	$313,582.96	$3,135.83	$4,990.59	$308,592.37
Year #4 End
49	$308,592.37	$3,085.92	$5,040.50	$303,551.87
50	$303,551.87	$3,035.52	$5,090.90	$298,460.97
51	$298,460.97	$2,984.61	$5,141.81	$293,319.16
52	$293,319.16	$2,933.19	$5,193.23	$288,125.93
53	$288,125.93	$2,881.26	$5,245.16	$282,880.77
54	$282,880.77	$2,828.81	$5,297.61	$277,583.16
55	$277,583.16	$2,775.83	$5,350.59	$272,232.57
56	$272,232.57	$2,722.33	$5,404.10	$266,828.47
57	$266,828.47	$2,668.28	$5,458.14	$261,370.34
58	$261,370.34	$2,613.70	$5,512.72	$255,857.62
59	$255,857.62	$2,558.58	$5,567.84	$250,289.78
60	$250,289.78	$2,502.90	$5,623.52	$244,666.25
Year #5 End
61	$244,666.25	$2,446.66	$5,679.76	$238,986.49
62	$238,986.49	$2,389.86	$5,736.56	$233,249.94
63	$233,249.94	$2,332.50	$5,793.92	$227,456.02
64	$227,456.02	$2,274.56	$5,851.86	$221,604.16
65	$221,604.16	$2,216.04	$5,910.38	$215,693.78
66	$215,693.78	$2,156.94	$5,969.48	$209,724.29
67	$209,724.29	$2,097.24	$6,029.18	$203,695.12
68	$203,695.12	$2,036.95	$6,089.47	$197,605.65
69	$197,605.65	$1,976.06	$6,150.36	$191,455.28
70	$191,455.28	$1,914.55	$6,211.87	$185,243.42
71	$185,243.42	$1,852.43	$6,273.99	$178,969.43
72	$178,969.43	$1,789.69	$6,336.73	$172,632.70
Year #6 End
73	$172,632.70	$1,726.33	$6,400.09	$166,232.61
74	$166,232.61	$1,662.33	$6,464.09	$159,768.51
75	$159,768.51	$1,597.69	$6,528.74	$153,239.78
76	$153,239.78	$1,532.40	$6,594.02	$146,645.76
77	$146,645.76	$1,466.46	$6,659.96	$139,985.79
78	$139,985.79	$1,399.86	$6,726.56	$133,259.23
79	$133,259.23	$1,332.59	$6,793.83	$126,465.40
80	$126,465.40	$1,264.65	$6,861.77	$119,603.63
81	$119,603.63	$1,196.04	$6,930.38	$112,673.25
82	$112,673.25	$1,126.73	$6,999.69	$105,673.56
83	$105,673.56	$1,056.74	$7,069.69	$98,603.88
84	$98,603.88	$986.04	$7,140.38	$91,463.49
Year #7 End
85	$91,463.49	$914.63	$7,211.79	$84,251.71
86	$84,251.71	$842.52	$7,283.90	$76,967.81
87	$76,967.81	$769.68	$7,356.74	$69,611.06
88	$69,611.06	$696.11	$7,430.31	$62,180.75
89	$62,180.75	$621.81	$7,504.61	$54,676.14
90	$54,676.14	$546.76	$7,579.66	$47,096.48
91	$47,096.48	$470.96	$7,655.46	$39,441.02
92	$39,441.02	$394.41	$7,732.01	$31,709.01
93	$31,709.01	$317.09	$7,809.33	$23,899.68
94	$23,899.68	$239.00	$7,887.42	$16,012.26
95	$16,012.26	$160.12	$7,966.30	$8,045.96
96	$8,045.96	$80.46	$8,045.96	$0.00
Year #8 End