Ali received a loan of $28,000 at 6.5% compounded quarterly. He had to make payments at...

Ali received a loan of $28,000 at 6.5% compounded quarterly. He had to make payments at the end of every quarter for a period of 8 years to settle the loan.

a. Calculate the size of payments.

Round to the nearest cent

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				$28,000.00
1
2
: :	: :	: :	: :	: :
: :	: :	: :	: :	: :
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 please	0.00
Total	Fill in please	Fill in please	Fill in please

Expert Solution

Question a:

Loan Amount = PV = $28,000

n = 8*4 = 32 Quarters

r = Quarterly interest rate = 6.5%/4 = 1.625%

Quarterly loan payment = [r*PV] / [1 - (1+r)^-n]

= [1.625% * $28,000] / [1 - (1+1.625%)^-32]

= $455 / 0.402989286

= $1,129.062274

Therefore, Quarterly loan payment is $1,129.06

Question b:

Amortization Schedule
Quarter	Beginning Balance	Payment	Interest Portion of Payment	Principal Portion of Payment	Closing Balance
A	B	C	*D = B1.625%**	E = C-D	F = B-E
1	28000.00	1129.06	455.00	674.06	27325.94
2	27325.94	1129.06	444.05	685.01	26640.93
3	26640.93	1129.06	432.92	696.14	25944.78
4	25944.78	1129.06	421.60	707.46	25237.32
5	25237.32	1129.06	410.11	718.95	24518.37
6	24518.37	1129.06	398.42	730.64	23787.73
7	23787.73	1129.06	386.55	742.51	23045.23
8	23045.23	1129.06	374.48	754.58	22290.65
9	22290.65	1129.06	362.22	766.84	21523.81
10	21523.81	1129.06	349.76	779.30	20744.51
11	20744.51	1129.06	337.10	791.96	19952.55
12	19952.55	1129.06	324.23	804.83	19147.72
13	19147.72	1129.06	311.15	817.91	18329.81
14	18329.81	1129.06	297.86	831.20	17498.61
15	17498.61	1129.06	284.35	844.71	16653.90
16	16653.90	1129.06	270.63	858.43	15795.47
17	15795.47	1129.06	256.68	872.38	14923.09
18	14923.09	1129.06	242.50	886.56	14036.53
19	14036.53	1129.06	228.09	900.97	13135.56
20	13135.56	1129.06	213.45	915.61	12219.95
21	12219.95	1129.06	198.57	930.49	11289.47
22	11289.47	1129.06	183.45	945.61	10343.86
23	10343.86	1129.06	168.09	960.97	9382.89
24	9382.89	1129.06	152.47	976.59	8406.30
25	8406.30	1129.06	136.60	992.46	7413.84
26	7413.84	1129.06	120.47	1008.59	6405.26
27	6405.26	1129.06	104.09	1024.97	5380.28
28	5380.28	1129.06	87.43	1041.63	4338.65
29	4338.65	1129.06	70.50	1058.56	3280.10
30	3280.10	1129.06	53.30	1075.76	2204.34
31	2204.34	1129.06	35.82	1093.24	1111.10
32	1111.10	1129.06	18.06	1111.00	0.0

jeff jeffy answered 1 year ago

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