Question

Construct an amortization schedule for a four-year, RM10,000 loan at 6% interest compounded annually.

Answer 1

Calculation of Yearly Payment amount

Use PMT formula in excel

Formula =PMT(rate of interest,Number of instalments,Principal Amount)

Yealy payment =PMT(6%,10000) = 2885.91

(See notes 2 for details)

Then go through the following Calculation:

Amortization schedule for a four-year

Calculation	Heads	1st year	2st year	3st year	4th year
A	Beginning Prncipal Amount	10000	7714.09	5291.03	2722.58
B	Yearly Payment	2885.91	2885.91	2885.91	2885.91
C	Interest Portion (6% of 10000)	600	462.85	317.46	163.35
D= B-C	Principal Portion = Yearly Payment-Interest	2285.91	2423.06	2568.45	2722.56

Notes 1.	A loan amortization schedule gives you the most basic information about your loan and how you'll repay it.
	It typically includes a full list of all the payments that you'll be required to make over the lifetime of the loan.
	Each payment on the schedule gets broken down according to the portion of the payment that goes toward interest and principal.
	You'll also typically get a summary of your loan repayment, either at the bottom of the amortization schedule or in a separate section.
	The summary will total up all the interest payments that you've paid over the course of the loan,
	while also verifying that the total of the principal payments adds up to the total outstanding amount of the loan.

Notes 2.	You can use an Excel spreadsheet to compute the payment yearly payment, if not available in question.
	The PMT function gives you the payment based on the interest rate, number of payments, and principal balance for the loan.
	For instance, to calculate the monthly payment in the example above, you could set an Excel cell to =PMT(6%,4,10000). It would give you the RM2885.91 figure you saw in that example.

Additional Information:

We can construct a monthly amortization table with same method, just change the number of instalment to 48 (ie .4*12 months) for getting monthly instalment amount.

Then compute the montly interest portion & and principal amount , and prepare monthly Amortization table