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 ​(Loan amortization)  On December​ 31, Beth Klemkosky bought a yacht for ​$100,000. She paid ​$20,000 down...

 ​(Loan amortization)  On December​ 31, Beth Klemkosky bought a yacht for ​$100,000. She paid ​$20,000 down and agreed to pay the balance in 14 equal annual installments that include both the principal and 15 percent interest on the declining balance.

How big will the annual payments​ be?

On December​ 31, Beth Klemkosky bought a yacht for ​$100,000 and paid ​$20,000 ​down, how much does she need to borrow to purchase the​ yacht?

Solutions

Expert Solution

amount borrowed = price - down = 100000-20000=80000

Annual rate(M)= yearly rate/12= 15.00% Annual payment= 13975.08
Year Beginning balance (A) Annual payment Interest = M*A Principal paid Ending balance
1 80000.00 13975.08 12000.00 1975.08 78024.92
2 78024.92 13975.08 11703.74 2271.34 75753.58
3 75753.58 13975.08 11363.04 2612.04 73141.54
4 73141.54 13975.08 10971.23 3003.85 70137.69
5 70137.69 13975.08 10520.65 3454.43 66683.26
6 66683.26 13975.08 10002.49 3972.59 62710.67
7 62710.67 13975.08 9406.60 4568.48 58142.20
8 58142.20 13975.08 8721.33 5253.75 52888.45
9 52888.45 13975.08 7933.27 6041.81 46846.63
10 46846.63 13975.08 7026.99 6948.08 39898.55
11 39898.55 13975.08 5984.78 7990.30 31908.25
12 31908.25 13975.08 4786.24 9188.84 22719.41
13 22719.41 13975.08 3407.91 10567.17 12152.24
14 12152.24 13975.08 1822.84 12152.24 0.00
Where
Interest paid = Beginning balance * Annual interest rate
Principal = Annual payment – interest paid
Ending balance = beginning balance – principal paid
Beginning balance = previous Year ending balance

jeff jeffy answered 1 year ago
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