Question

Construct an amortization schedule for a loan with the following characteristics. Loan amount = $10,000; term = 5 years; interest rate = 8 percent; annual payments.

Answer 1

given about a loan,

loan amount = $10000

interest rate = 8%

Term = 5 years,

So annual payment of this loan is calculated as,

PMT = PV*r/(1 - (1+r)^-t) = 10000*0.08/(1 - 1.08^-5) = $2504.56

Amortization schedule is calculated in table below:

Payment for every year = Annual payment = $2504.56

Interest = previous year balance*interest rate 8% = previous balance*0.08

Principal = Payment - Interest

Balance = Previous balance - principal

Month	Payment	Interest	Principal	Balance
0				$ 10,000.00
1	$   2,504.56	$ 800.00	$                  1,704.56	$   8,295.44
2	$   2,504.56	$ 663.63	$                  1,840.93	$   6,454.51
3	$   2,504.56	$ 516.36	$                  1,988.20	$   4,466.30
4	$   2,504.56	$ 357.30	$                  2,147.26	$   2,319.04
5	$   2,504.56	$ 185.52	$                  2,319.04	$                -