Question

1. You get a car loan for $16,000 at an annual interest rate of 7%, which requires 5 annual payments. Draw a loan amortization chart, which details the payment, interest and principal each year of the loan. Replicate the chart in Excel using monthly payments. For each of the following questions, continue to identify the critical values, draw a time line, write the appropriate formula, and then solve the problem.

Answer 1

Loan amortization Schedule:
Year	Beginning Loan	Annual Payment	Interest Expense	Principal Payment	Ending Loan
	a	b	c=a*7%	d=b-c	e=a-d
1	$ 16,000.00	$   3,902.25	$ 1,120.00	$   2,782.25	$ 13,217.75
2	$ 13,217.75	$   3,902.25	$     925.24	$   2,977.01	$ 10,240.74
3	$ 10,240.74	$   3,902.25	$     716.85	$   3,185.40	$   7,055.34
4	$   7,055.34	$   3,902.25	$     493.87	$   3,408.38	$   3,646.96
5	$   3,646.96	$   3,902.25	$     255.29	$   3,646.96	$ 0.00
Total		$ 19,511.26	$ 3,511.26	$ 16,000.00
Working:
Annual Payment	=-pmt(rate,nper,pv,fv)		Where,
	$   3,902.25			rate	=	7%
				nper	=	5
				pv	=	$ 16,000.00
				fv	=	0