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

jeff jeffy answered 1 year ago

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