In: Finance
Finance Course: XYZ Industries is negotiating for a $150,000, four years, 12 percent term loan. Determine the size of the yearly payments and the loan amortization schedule. (Loan amortization schedule is a table specifying for each year what is the annual payment, how much interest the firm pays, how much principal is repaid, and what is the remaining balance on the principal – like the example we did in class.)
Loan amount = PV= -150000
Number of years = N = 4
Rate = I/Y = 12
We can compute the yearly payments with the above inputs in a financial calculator. Find PMT as 49385.17
It can also be computed in excel using PMT function as per image attached.
Amortization schedule will be
Year | StartingBalance | Interest | Principal | EndingBalance | TotalInterest |
1 | $150,000.00 | $18,000.00 | $31,385.17 | $118,614.83 | $18,000.00 |
2 | $118,614.83 | $14,233.78 | $35,151.39 | $83,463.45 | $32,233.78 |
3 | $83,463.45 | $10,015.61 | $39,369.55 | $44,093.90 | $42,249.39 |
4 | $44,093.90 | $5,291.27 | $44,093.90 | $0.00 | $47,540.66 |
WORKINGS