Question

In: Finance

Finance Course: XYZ Industries is negotiating for a $150,000, four years, 12 percent term loan. Determine...

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.)

Solutions

Expert Solution

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


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