Question

In: Finance

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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