Question

Laurel Regional Hospital needs to borrow $80million to finance its new facility. The interest rate is 8 percent for the loan. Principal and interest payments are equal debt service payments, made on an annual basis. The length of the loan is 10 years. The CEO would like to develop a loan amortization schedule for this debt issuance. Prepare such a schedule.

Answer 1

First we need to find annual payment amount.

If the loan amount is P, rate on interest (monthly is r, and loan term is n the EMI will be

EMI = P*r[(1 +r)^n]/ [(1+ r)^n- 1]

Where,

              Loan amount (P) = $80000000

                Time (n) = 10

               Interest rate [r] = 8% /period

Let's put all the values in the formula to calculate EMI

EMI = 80000000*0.08[(1 +0.08)^10]/ [(1+ 0.08)^10- 1]

        = 6400000[(1.08)^10]/ [(1.08)^10- 1]

        = 6400000[2.1589249973]/ [2.1589249973- 1]

        = 6400000[2.1589249973]/ [1.1589249973]

        = 6400000[1.86286860869318]

        = 11922359.1

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Period	Loan balance	Periodic Payment (EMI)	Interest	Principle Payment	Remaining Loan
0	80000000
1	80000000	11922359.1	6400000	5522359.096	74477640.9
2	74477640.9	11922359.1	5958211.272	5964147.823	68513493.08
3	68513493.08	11922359.1	5481079.446	6441279.649	62072213.43
4	62072213.43	11922359.1	4965777.075	6956582.021	55115631.41
5	55115631.41	11922359.1	4409250.513	7513108.583	47602522.83
6	47602522.83	11922359.1	3808201.826	8114157.27	39488365.56
7	39488365.56	11922359.1	3159069.245	8763289.851	30725075.71
8	30725075.71	11922359.1	2458006.057	9464353.039	21260722.67
9	21260722.67	11922359.1	1700857.813	10221501.28	11039221.38
10	11039221.38	11922359.1	883137.7108	11039221.38	0

                                                                       

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