In: Finance
your company is planning to borrow $100000 on a 10 year 7% annual payment, fully amortized term loan. What fraction of the payment made at the end of the third year will represent repayment of principal?
PV = 100000
Rate = 7%
Number of Years = 10
Periodic payment
PMT = PV/(1-(1+r)-n)/r
PMT = 100000/(1-(1+7%)-10)/7% = 14237.75
Following amortisation table has been created in excel
Beginning Balance= 1000000 | PMT =PMT(7%,10,-100000) | Interest part of PMT=7%*Beginning Principal | Principal part of PMT= PMT-Interest | Ending Balance= Beginning balance-Principal part of PMT | |
1 | 100000 | $14,237.75 | 7000 | $7,237.75 | $92,762.25 |
2 | $92,762.25 | $14,237.75 | 6493.357481 | $7,744.39 | $85,017.86 |
3 | $85,017.86 | $14,237.75 | 5951.249985 | $8,286.50 | $76,731.36 |
4 | $76,731.36 | $14,237.75 | 5371.194965 | $8,866.56 | $67,864.80 |
5 | $67,864.80 | $14,237.75 | 4750.536094 | $9,487.21 | $58,377.59 |
6 | $58,377.59 | $14,237.75 | 4086.431101 | $10,151.32 | $48,226.27 |
7 | $48,226.27 | $14,237.75 | 3375.838759 | $10,861.91 | $37,364.36 |
8 | $37,364.36 | $14,237.75 | 2615.504953 | $11,622.25 | $25,742.11 |
9 | $25,742.11 | $14,237.75 | 1801.947781 | $12,435.80 | $13,306.31 |
10 | $13,306.31 | $14,237.75 | 931.4416066 | $13,306.31 | $0.00 |
Principal Part fraction = 8286.50/14237.75 = 0.5820 or 58.20%
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