Question

Determine the annual payment on a $17,000 loan that is to be amortized over a four-year period and carries a 10 percent interest rate. Also prepare a loan amortization schedule for this loan.

Answer 1

Loan Amount = $17,000

Calculating the annual payment of the loan :-

where, P = Loan amount = $17,000

r = Periodic Interest rate = 10%

n= no of periods = 4

So, Annual payment over 4 year per year = $5363

- Preparing the Loan Amortization schedule of this loan:-

Year	Beg bal.	Payment	Interest amount	Principal Amount	End Bal.
1	17,000.00	5,363.00	1,700.00	3,663.00	13,337.00
2	13,337.00	5,363.00	1,333.70	4,029.30	9,307.70
3	9,307.70	5,363.00	930.77	4,432.23	4,875.47
4	4,875.47	5,363.00	487.55	4,875.45	0.02

The following Columns are calculated based on:

- Interest amount = beg. Balnace*Monthly interest rate

- Principal maount = Payment - Interest amount

- End Bal. = Beg. Bal + Interest - Payment

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