In: Finance
a. Complete an amortization schedule for a $26,000 loan to be
repaid in equal installments at...
a. Complete an amortization schedule for a $26,000 loan to be
repaid in equal installments at the end of each of the next three
years. The interest rate is 8% compounded annually. Round all
answers to the nearest cent.
Year |
Beginning Balance |
Payment |
Interest |
Repayment of Principal |
Ending Balance |
1 |
|
|
|
|
|
2 |
|
|
|
|
|
3 |
|
|
|
|
|
b. What percentage of the payment represents interest and what
percentage represents principal for each of the three years? Round
all answers to two decimal places.Yea
Year |
% Interest |
% Principal |
1 |
|
|
2 |
|
|
3 |
|
|
c. Why do these percentages change over time?
- These percentages change over time because even though the
total payment is constant the amount of interest paid each year is
declining as the remaining or outstanding balance declines.
- These percentages change over time because even though the
total payment is constant the amount of interest paid each year is
increasing as the remaining or outstanding balance declines.
- These percentages change over time because even though the
total payment is constant the amount of interest paid each year is
declining as the remaining or outstanding balance increases.
- These percentages change over time because even though the
total payment is constant the amount of interest paid each year is
increasing as the remaining or outstanding balance increases.
- These percentages do not change over time; interest and
principal are each a constant percentage of the total payment.