Construct an amortization schedule that includes all the required information and illustrate the relationship between the...

Construct an amortization schedule that includes all the required information and illustrate the relationship between the elements in this schedule.

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Expert Solution

An amortization table shows the periodic payments to be made by a borrower towards a loan/mortgage payment and also states the proportion of the periodic payment assigned for interest versus principal.

An illustrative schedule is given below:

Loan amount: $5000, Interest rate: 4% p.a, Loan period= 1 year, No. of payments p.a= 12, Sceduled payment per month= 525.75

PMT Number	Beginning Balance	Total payment	Principal	Interest	Ending Balance	Cumulative Interest
1	5000	525.75	509.08	16.67	4490.92	16.67
2	4490.92	525.75	510.78	14.97	3980.14	31.64
3
4

PMT number is the serial number of the payment

Beginning balance starts with the total loan amount and keeps decreasing with every payment. Beginning balance of period 2= Ending balance of period 1

Total payment for each period is inclusive of principal and interest component

Interest is calculated first and then the principal payment is computed by deducting interest from total payment

Ending balance= beginning balance- principal payment

jeff jeffy answered 1 year ago

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