Question

Amanda took a loan of ???10,000 from a bank at 5% interest rate compounded quarterly. The loan is to be amortised by equal quarterly payments over 1year, 3months time. i. Find the regular payment Amanda would make. ii. Construct an amortization schedule for the payment of the loan. A. Amanda took a loan of ???10,000 from a bank at 5% interest rate compounded quarterly. The loan is to be amortised by equal quarterly payments over 1year, 3months time. i. Find the regular payment Amanda would make. ii. Construct an amortization schedule for the payment of the loan. A. Amanda took a loan of ???10,000 from a bank at 5% interest rate compounded quarterly. The loan is to be amortised by equal quarterly payments over 1year, 3months time. i. Find the regular payment Amanda would make. ii. Construct an amortization schedule for the payment of the loan.

Answer 1

Answer i:

Amanda took a loan of GHC 10,000 from a bank at 5 % interest rate compunded quarterly. The Loan is to be repaid by equal quarterly payments over 1 year 3 months.

Therefore, the Regular payment Amanda would make will be as calculated below:

Loan Amount (P) = GHC 10,000

No. of times the interest is compounded (n) = 4

Interest Rate (r) = 5 % p.a. compunded quarterly = 0.05

Time (t) = 1 year 3 months i.e. 1.25 years

Therfore, Amount = P (1+r/n)^nt

= 10000(1+0.05/4)^ (4*1.25)

= GHC 2075.62

Therefore, the Quaterly Regular Payment made by Amanda will be GHC 2075.62.

Answer ii:

The Amortization Schedule for the payment of the Loan will be as follows:

The Calculation for Interest Amount for the 1st Quarter is calculated as = 10000* 5%*3/12 = GHC 125

Therefore the Principal paid = GHC (2075.62-125) = GHC 1950.62

The Rest of the Quarters payment will be calculated in the similar fashion and the schedule will be as follows:

(Amount in GHC)

Quarter	Payment	Principal Paid	Interest Paid	Balance
1	2075.62	1950.62	125.00	8049.38
2	2075.62	1975.00	100.62	6074.38
3	2075.62	1999.69	75.93	4074.69
4	2075.62	2024.69	50.93	2050.00
5	2075.62	2050.00	25.62	0.00
Total	10378.10	10,000	378.10