In: Accounting
Please answer the following:
Loan Amortization
Your company is planning to borrow $1.5 million on a 7-year, 8%, annual payment, fully amortized term loan. What fraction of the payment made at the end of the second year will represent repayment of principal? Round your answer to two decimal places.
Thank you!
Amount of Borrowing | 1500000 | ||||||
Years | 7 | ||||||
Rate of Interest | 8% | Year | PVF @ 8% | ||||
1 | 0.93 | ||||||
Equated Annual Installment= | Loan Amount/Cumulated DF @8%,7 Years) | 2 | 0.86 | ||||
Equated Annual Installment= | 1500000/5.21 | 3 | 0.79 | ||||
Equated Annual Installment= | 288108.6 | 4 | 0.74 | ||||
5 | 0.68 | ||||||
6 | 0.63 | ||||||
7 | 0.58 | ||||||
5.21 | |||||||
A | B | C=A*8% | D=B-C | A-D | |||
Year | Opening Loan Balance | Installment Amount | Interest | Principal | Closing Loan Balance | ||
1 | 1500000 | 288109 | 120000 | 168109 | 1331891 | ||
2 | 1331891 | 288109 | 106551 | 181557 | 1150334 | ||
3 | 1150334 | 288109 | 92027 | 196082 | 954252 | ||
4 | 954252 | 288109 | 76340 | 211768 | 742484 | ||
5 | 742484 | 288109 | 59399 | 228710 | 513774 | ||
6 | 513774 | 288109 | 41102 | 247007 | 266767 | ||
7 | 266767 | 288109 | 21341 | 266767 | 0 | ||
2016760 | 516760 | 1500000 | |||||
Answer | Payment towards Principal at Year 2 | 181557 | |||||
BreakUp of 2nd Installment: | |||||||
Installment Amount | Interest | Principal | |||||
288109 | 106551 | 181557 | |||||