Question

General Computers Inc. purchased a computer server for $63,000. It paid 40.00% of the value as a down payment and received a loan for the balance at 9.50% compounded semi-annually. It made payments of $2,900.56 at the end of every quarter to settle the loan.

a. How many payments are required to settle the loan?

payments

Round up to the next payment

b. Fill in the partial amortization schedule for the loan, rounding your answers to two decimal places.

Payment Number	Payment	Interest Portion	Principal Portion	Principal Balance
0				$37,800.00
1
2
: :	: :	: :	: :	: :
: :	: :	: :	: :	: :
Please fill in	Please fill in	Please fill in	Please fill in	Please fill in
Please fill in	Please fill in	Please fill in	Please fill in	0.00
Total	Please fill in	Please fill in	Please fill in

Answer 1

a) Payments required to settle the loan

Purchase price of the Computer = $ 63000

Downpayment Amount = $ 63000*40%

$ 25200

Loan Amount = Purcahse price - Downpayment

= $ 63000-$ 25200

= $ 37800

Rate of interest = 9.5% Compounded Semi Annually

Rate of interest for half year = 9.5%/2 = 4.75%

Rate of interest per Quarter =[ ( 1+i/2)^2n - 1]*100

Here n = 1/4 ( Quarter ) and i= 9.5%

= [( 1+9.5/200)^2/4 - 1 ]*100

= [( 1.0475)^0.5 - 1 ]*100

= [ 1.023474-1]*100

= [ 0.02347]*100

=2.347%

Payments required to settle the loan

S.No	Opening Balance	Interest @ 2.347% on Opening Balance	Total Outstanding Balance( OB+Interest)	Amount paid	Principal portion( Amount paid - Interest)	Closing Balance( Total Outstanding - Amount paid)
1	$37,800	$887.17	$38,687.17	$2,900.56	$2,013.39	$35,786.61
2	$35,786.61	$839.91	$36,626.52	$2,900.56	$2,060.65	$33,725.96
3	$33,725.96	$791.55	$34,517.51	$2,900.56	$2,109.01	$31,616.95
4	$31,616.95	$742.05	$32,359.00	$2,900.56	$2,158.51	$29,458.44
5	$29,458.44	$691.39	$30,149.83	$2,900.56	$2,209.17	$27,249.27
6	$27,249.27	$639.54	$27,888.81	$2,900.56	$2,261.02	$24,988.25
7	$24,988.25	$586.47	$25,574.72	$2,900.56	$2,314.09	$22,674.16
8	$22,674.16	$532.16	$23,206.32	$2,900.56	$2,368.40	$20,305.76
9	$20,305.76	$476.58	$20,782.34	$2,900.56	$2,423.98	$17,881.78
10	$17,881.78	$419.69	$18,301.46	$2,900.56	$2,480.87	$15,400.90
11	$15,400.90	$361.46	$15,762.36	$2,900.56	$2,539.10	$12,861.80
12	$12,861.80	$301.87	$13,163.67	$2,900.56	$2,598.69	$10,263.11
13	$10,263.11	$240.88	$10,503.98	$2,900.56	$2,659.68	$7,603.42
14	$7,603.42	$178.45	$7,781.88	$2,900.56	$2,722.11	$4,881.32
15	$4,881.32	$114.56	$4,995.88	$2,900.56	$2,786.00	$2,095.32
16	$2,095.32	$49.18	$2,144.50	$2,144.50	$2,095.32	($0.00)

Total no.of payments requiredto settle the loan = 16

Note ; Last installment amount is $ 2144.50

b) Amortization Schedule

Payment number	Payment	Interest Portion @ 2.347%	Principal portion( Payment - Interest)	Principal balance
0				$37,800.00
1	$2,900.56	$887.17	$2,013.39	$35,786.61
2	$2,900.56	$839.91	$2,060.65	$33,725.96
3	$2,900.56	$791.55	$2,109.01	$31,616.95
4	$2,900.56	$742.05	$2,158.51	$29,458.44
5	$2,900.56	$691.39	$2,209.17	$27,249.27
6	$2,900.56	$639.54	$2,261.02	$24,988.25
7	$2,900.56	$586.47	$2,314.09	$22,674.16
8	$2,900.56	$532.16	$2,368.40	$20,305.76
9	$2,900.56	$476.58	$2,423.98	$17,881.78
10	$2,900.56	$419.69	$2,480.87	$15,400.90
11	$2,900.56	$361.46	$2,539.10	$12,861.80
12	$2,900.56	$301.87	$2,598.69	$10,263.11
13	$2,900.56	$240.88	$2,659.68	$7,603.42
14	$2,900.56	$178.45	$2,722.11	$4,881.32
15	$2,900.56	$114.56	$2,786.00	$2,095.32
16	$2,144.50	$49.18	$2,095.32	$0.00

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