Question

You borrow a GPM of $50,000 with annual payments and 3- year term. The interest rate is 10% and the payment factors from years 1 to 3 are as follows: 50%, 50% and 100%

Questions: 1.What are the annual payments for years 1 to 3?

2.What is remaining balance at the end of year 1?

3.What are interest payment and principal payment for years 1 to 3?

Answer 1

1. Annual Payments

Loan Amount = 50000, Tenure 3 years and Rate 10% EMIs are in ratio 50% 50% 100%

So lets Assume 1st EMI = X , so the same as 2nd and then 3rd would be 2x. Now equate both to calculate the value of X.

= 50000 = 0.9091x + 0.8264x + 1.5026x

= 50000 = 3.2381x

X = 15441

So 1st payment 15441, 2nd 15441 and 3rd = 30882

For the Next two questions you need amortization table . Which is as below:

Opening Loan Balance	EMIs	Interst on Opening Loan @ 10%	EMI-Interest= Principal	Closing Loan balance
50000.00	15441.00	5000.00	10441.00	39559.00
39559.00	15441.00	3955.90	11485.10	28073.90
28073.90	30882.00	2808.00	28073.90	0.00
	Total	11763.90	50000.00

2. Remaining Balance at the end of year 1 is 39559 as calculate din above table.

3. Interest paand Principal payments:

Interst = 11763.90

Pricipal = 50000

Both as calculated above