1. A student borrows $5000 for college from his aunt and uncle on June 1, 2020....

1. A student borrows $5000 for college from his aunt and uncle on June 1, 2020. He agrees to repay them $500 on 6/1/2021, 6/1/2022, 6/1/2023, and 6/1/2024; plus three additional payments of X on 6/1/2025, 6/1/2026, and 6/1/2027. They agree to an interest rate of 1.5% compounded annually. Find X

2. For the loan described in question #1, write out the amortization schedule for the loan.

Please show steps

Thank You

Solutions

Expert Solution


Date	Amount o/s	Interest	Total	Payment	Payment Against	Balance
		0.015			Principal	Interest	Principal	Interest
06-01-21	5000	75	5075	500	425	75	4575	0
06-01-22	4575	68.625	4643.625	500	431.375	68.625	4143.625	0
06-01-23	4143.625	62.15438	4205.779	500	437.8456	62.15438	3705.779	0
06-01-24	3705.77938	55.58669	3761.366	500	444.4133	55.58669	3261.366	0
06-01-25	3261.36607	48.92049	3310.287	1119.898	1070.977	48.92049	2190.389	0
06-01-26	2190.38888	32.85583	2223.245	1119.898	1087.042	32.85583	1103.347	0
06-01-27	1103.34705	16.55021	1119.897	1119.898	1103.347	16.55021	-0.00042	0

From 2025 X amount is paid each year means,
Three annuities are paid at 0.015 interest rate.
Annuity=Principle/PVAF(1.5%,3years)
3261.366/2.9122	=	1119.898

jeff jeffy answered 1 year ago

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