Question

Assume that you will have a 10-year, $19,000 loan to repay when you graduate from college next month. The loan, plus 6 percent annual interest on the unpaid balance, is to be repaid in 10 annual installments of $2,581 each, beginning one year after you graduate. You have accepted a well-paying job and are considering an early settlement of the entire unpaid balance in just three years (immediately after making the third annual payment of $2,581). Prepare an amortization schedule showing how much money you will need to save to pay the entire unpaid balance of your loan three years after your graduation. (Round your answers to the nearest dollar amount. Enter all amounts as positive numbers.)  

Answer 1

Since amount for first three years is fixed annual payment already given in
question, we just have to arrive at outstanding balance at the end of three years
that can be paid in lump sum for final settlement of loan.
	A	B = D x 6%	C = A -B	D
interest period	annual payment	annual interest expense @6%	reduction in unpaid balance	unpaid balance
date of graduation				19,000
year 1	2,581	1,140	1,441	17,559
year 2	2,581	1,054	1,527	16,032
year 3	2,581	962	1,619	14,412
Explanation:	19,000	given
	2,581	given
First Row	1140 = 19000 x 6%
First Row	1441 = 2581 - 1140
First Row	17559 = 19000-1441