Question

In: Finance

Complete an amortization schedule for a $26,000 loan to be repaid in equal installments at the...

  1. Complete an amortization schedule for a $26,000 loan to be repaid in equal installments at the end of each of the next 3 years. The interest rate is 9% compounded annually. If an amount is zero, enter "0". Do not round intermediate calculations. Round your answers to the nearest cent.

    Beginning Repayment Remaining
    Year Balance Payment Interest of Principal Balance
    1 $   $   $   $   $  
    2                         
    3                         
  2. What percentage of the payment represents interest and what percentage represents principal for each of the 3 years? Do not round intermediate calculations. Round your answers to two decimal places.

    % Interest % Principal
    Year 1:   %   %
    Year 2:   %   %
    Year 3:   %   %

    Why do these percentages change over time?

    1. These percentages change over time because even though the total payment is constant the amount of interest paid each year is declining as the remaining or outstanding balance declines.
    2. These percentages change over time because even though the total payment is constant the amount of interest paid each year is increasing as the remaining or outstanding balance declines.
    3. These percentages change over time because even though the total payment is constant the amount of interest paid each year is declining as the remaining or outstanding balance increases.
    4. These percentages change over time because even though the total payment is constant the amount of interest paid each year is increasing as the remaining or outstanding balance increases.
    5. These percentages do not change over time; interest and principal are each a constant percentage of the total payment.
    -Select-IIIIIIIVVItem 22

Solutions

Expert Solution

Question a:

PV = Loan amount = $26,000

n = 3 years

r = interest rate = 9%

Annual loan amount = [r * PV] / [1 - (1+r)^-n]

= [9% * $26,000] / [1 - (1+9%)^-3]

= $2,340 / 0.22781652

= $10,271.4237

Annual loan payment = $10,271.42

Amortization Schedule
Payment Beginning Balance Payment Interest Portion Principal Portion Closing Balance
A B C D = B*9% E = C-D F = B-E
1 $26,000 $10,271.42 $2,340.00 $7,931.42 $18,068.58
2 $18,068.58 $10,271.42 $1,626.17 $8,645.25 $9,423.33
3 $9,423.33 $10,271.42 $848.10 $9,423.32 $0.0
Question b:
% Interest % Principal
Year 1 22.78% 77.22%
Year 2 15.83% 84.17%
Year 3 8.26% 91.74%

Why these percentages change overtime?

  1. These percentages change over time because even though the total payment is constant the amount of interest paid each year is declining as the remaining or outstanding balance declines.

Related Solutions

a. Complete an amortization schedule for a $26,000 loan to be repaid in equal installments at...
a. Complete an amortization schedule for a $26,000 loan to be repaid in equal installments at the end of each of the next three years. The interest rate is 8% compounded annually. Round all answers to the nearest cent. Year Beginning Balance Payment Interest Repayment of Principal Ending Balance 1 2 3 b. What percentage of the payment represents interest and what percentage represents principal for each of the three years? Round all answers to two decimal places.Yea Year %...
a. Complete an amortization schedule for a $44,000 loan to be repaid in equal installments at...
a. Complete an amortization schedule for a $44,000 loan to be repaid in equal installments at the end of each of the next three years. The interest rate is 11% compounded annually. Round all answers to the nearest cent. Beginning Repayment Ending Year Balance Payment Interest of Principal Balance 1 $   $   $   $   $   2 $   $   $   $   $   3 $   $   $   $   $   b. What percentage of the payment represents interest and what percentage represents principal...
a. Complete an amortization schedule for a $38,000 loan to be repaid in equal installments at...
a. Complete an amortization schedule for a $38,000 loan to be repaid in equal installments at the end of each of the next three years. The interest rate is 12% compounded annually. Round all answers to the nearest cent. Beginning Balance -Payment -Interest -Repayment of Principal -Ending Balance 1 $ $ $ $ $ 2 $ $ $ $ $ 3 $ $ $ $ $ b. What percentage of the payment represents interest and what percentage represents principal for...
a. complete an amortization schedule for a 33,000 loan to be repaid in equal installments at...
a. complete an amortization schedule for a 33,000 loan to be repaid in equal installments at the end of each of the next three years. The interest rate is 12% compounded annually. round all answers to the nearest cent. b. what percentage of the payment represents interest and what percentage represents principal for each of the three years? round all answers to two decimal places .
Complete an amortization schedule for a $23,000 loan to be repaid in equal installments at the...
Complete an amortization schedule for a $23,000 loan to be repaid in equal installments at the end of each of the next 3 years. The interest rate is 11% compounded annually. If an amount is zero, enter "0". Do not round intermediate calculations. Round your answers to the nearest cent. Beginning Repayment Remaining Year Balance Payment Interest of Principal Balance 1 $   $   $   $   $   2                          3                          What percentage...
Complete an amortization schedule for a $42,000 loan to be repaid in equal installments at the...
Complete an amortization schedule for a $42,000 loan to be repaid in equal installments at the end of each of the next three years. The interest rate is 12% compounded annually. Round all answers to the nearest cent. Beginning Repayment Ending Year Balance Payment Interest of Principal Balance 1 $   $   $   $   $   2 $   $   $   $   $   3 $   $   $   $   $   b. What percentage of the payment represents interest and what percentage represents principal for...
Complete an amortization schedule for a $22,000 loan to be repaid in equal installments at the...
Complete an amortization schedule for a $22,000 loan to be repaid in equal installments at the end of each of the next 3 years. The interest rate is 7% compounded annually. If an amount is zero, enter "0". Do not round intermediate calculations. Round your answers to the nearest cent. Beginning Repayment Remaining Year Balance Payment Interest of Principal Balance 1 $   $   $   $   $   2                          3                          What percentage...
Complete an amortization schedule for a $28,000 loan to be repaid in equal installments at the...
Complete an amortization schedule for a $28,000 loan to be repaid in equal installments at the end of each of the next three years. The interest rate is 9% compounded annually. If an amount is zero, enter "0". Do not round intermediate calculations. Round your answers to the nearest cent. Beginning Repayment Ending Year Balance Payment Interest of Principal Balance 1 $   $   $   $   $   2                          3                          What percentage...
a. Complete an amortization schedule for a $32,000 loan to be repaid in equal installments at...
a. Complete an amortization schedule for a $32,000 loan to be repaid in equal installments at the end of each of the next three years. The interest rate is 10% compounded annually. If an amount is zero, enter "0". Do not round intermediate calculations. Round your answers to the nearest cent. b. What percentage of the payment represents interest and what percentage represents principal for each of the three years? Do not round intermediate calculations. Round your answers to two...
a. Complete an amortization schedule for a $37,000 loan to be repaid in equal installments at...
a. Complete an amortization schedule for a $37,000 loan to be repaid in equal installments at the end of each of the next three years. The interest rate is 11% compounded annually. Round all answers to the nearest cent. b. What percentage of the payment represents interest and what percentage represents principal for each of the three years? Round all answers to two decimal places. c. Why do these percentages change over time? These percentages change over time because even...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT