Homework Answers
| CONSTANT PAYMENT METHOD: | ||||||
| The constant instalment = 80*1500*70%*0.075*1.075^20/(1.075^20-1) = | $ 8,239.74 | |||||
| a] | Year | Loan Balance | Payment | Interest | Principal | End of Year Balance |
| 1 | $ 84,000.00 | $ 8,239.74 | $ 6,300.00 | $ 1,939.74 | $ 82,060.26 | |
| 2 | $ 82,060.26 | $ 8,239.74 | $ 6,154.52 | $ 2,085.22 | $ 79,975.04 | |
| 3 | $ 79,975.04 | $ 8,239.74 | $ 5,998.13 | $ 2,241.61 | $ 77,733.43 | |
| 4 | $ 77,733.43 | $ 8,239.74 | $ 5,830.01 | $ 2,409.73 | $ 75,323.69 | |
| 5 | $ 75,323.69 | $ 8,239.74 | $ 5,649.28 | $ 2,590.46 | $ 72,733.23 | |
| 6 | $ 72,733.23 | $ 8,239.74 | $ 5,454.99 | $ 2,784.75 | $ 69,948.48 | |
| 7 | $ 69,948.48 | $ 8,239.74 | $ 5,246.14 | $ 2,993.60 | $ 66,954.88 | |
| 8 | $ 66,954.88 | $ 8,239.74 | $ 5,021.62 | $ 3,218.12 | $ 63,736.76 | |
| 9 | $ 63,736.76 | $ 8,239.74 | $ 4,780.26 | $ 3,459.48 | $ 60,277.27 | |
| 10 | $ 60,277.27 | $ 8,239.74 | $ 4,520.80 | $ 3,718.94 | $ 56,558.33 | |
| 11 | $ 56,558.33 | $ 8,239.74 | $ 4,241.87 | $ 3,997.87 | $ 52,560.46 | |
| 12 | $ 52,560.46 | $ 8,239.74 | $ 3,942.03 | $ 4,297.71 | $ 48,262.76 | |
| 13 | $ 48,262.76 | $ 8,239.74 | $ 3,619.71 | $ 4,620.03 | $ 43,642.72 | |
| 14 | $ 43,642.72 | $ 8,239.74 | $ 3,273.20 | $ 4,966.54 | $ 38,676.19 | |
| 15 | $ 38,676.19 | $ 8,239.74 | $ 2,900.71 | $ 5,339.03 | $ 33,337.16 | |
| 16 | $ 33,337.16 | $ 8,239.74 | $ 2,500.29 | $ 5,739.45 | $ 27,597.71 | |
| 17 | $ 27,597.71 | $ 8,239.74 | $ 2,069.83 | $ 6,169.91 | $ 21,427.80 | |
| 18 | $ 21,427.80 | $ 8,239.74 | $ 1,607.08 | $ 6,632.66 | $ 14,795.14 | |
| 19 | $ 14,795.14 | $ 8,239.74 | $ 1,109.64 | $ 7,130.10 | $ 7,665.04 | |
| 20 | $ 7,665.04 | $ 8,239.92 | $ 574.88 | $ 7,665.04 | $ - | |
| b] | Total interest paid = | $ 80,794.98 | ||||
| a] | CONSTANT PAYMENT ON PRINCIPAL METHOD: | |||||
| Annual payment of principal = 84000/20 = | $ 4,200 | |||||
| Year | Loan Balance | Payment | Interest | Principal | End of Year Balance | |
| 1 | $ 84,000.00 | $ 10,500.00 | $ 6,300.00 | $ 4,200.00 | $ 79,800.00 | |
| 2 | $ 79,800.00 | $ 10,185.00 | $ 5,985.00 | $ 4,200.00 | $ 75,600.00 | |
| 3 | $ 75,600.00 | $ 9,870.00 | $ 5,670.00 | $ 4,200.00 | $ 71,400.00 | |
| 4 | $ 71,400.00 | $ 9,555.00 | $ 5,355.00 | $ 4,200.00 | $ 67,200.00 | |
| 5 | $ 67,200.00 | $ 9,240.00 | $ 5,040.00 | $ 4,200.00 | $ 63,000.00 | |
| 6 | $ 63,000.00 | $ 8,925.00 | $ 4,725.00 | $ 4,200.00 | $ 58,800.00 | |
| 7 | $ 58,800.00 | $ 8,610.00 | $ 4,410.00 | $ 4,200.00 | $ 54,600.00 | |
| 8 | $ 54,600.00 | $ 8,295.00 | $ 4,095.00 | $ 4,200.00 | $ 50,400.00 | |
| 9 | $ 50,400.00 | $ 7,980.00 | $ 3,780.00 | $ 4,200.00 | $ 46,200.00 | |
| 10 | $ 46,200.00 | $ 7,665.00 | $ 3,465.00 | $ 4,200.00 | $ 42,000.00 | |
| 11 | $ 42,000.00 | $ 7,350.00 | $ 3,150.00 | $ 4,200.00 | $ 37,800.00 | |
| 12 | $ 37,800.00 | $ 7,035.00 | $ 2,835.00 | $ 4,200.00 | $ 33,600.00 | |
| 13 | $ 33,600.00 | $ 6,720.00 | $ 2,520.00 | $ 4,200.00 | $ 29,400.00 | |
| 14 | $ 29,400.00 | $ 6,405.00 | $ 2,205.00 | $ 4,200.00 | $ 25,200.00 | |
| 15 | $ 25,200.00 | $ 6,090.00 | $ 1,890.00 | $ 4,200.00 | $ 21,000.00 | |
| 16 | $ 21,000.00 | $ 5,775.00 | $ 1,575.00 | $ 4,200.00 | $ 16,800.00 | |
| 17 | $ 16,800.00 | $ 5,460.00 | $ 1,260.00 | $ 4,200.00 | $ 12,600.00 | |
| 18 | $ 12,600.00 | $ 5,145.00 | $ 945.00 | $ 4,200.00 | $ 8,400.00 | |
| 19 | $ 8,400.00 | $ 4,830.00 | $ 630.00 | $ 4,200.00 | $ 4,200.00 | |
| 20 | $ 4,200.00 | $ 4,515.00 | $ 315.00 | $ 4,200.00 | $ - | |
| b] | Total interest paid = | $ 66,150.00 | ||||
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