Homework Answers
Step 1: Find the firstpayment
PV of annuity with growth = (P/ (r-g)) * (1- ((1+g)/(1+r))^n)
100000=X/(7%-4%) * (1-(1.04/1.07)^25)
100000 = 16.96X
X= 5896.23
| Year | Loan outstanding | Interest | Payment | Principal repaid |
| 1 | 100000.00 | 7000.00 | 5896.23 | -1103.77 |
| 2 | 101103.77 | 7077.26 | 6132.08 | -945.18 |
| 3 | 102048.95 | 7143.43 | 6377.36 | -766.06 |
| 4 | 102815.02 | 7197.05 | 6632.46 | -564.59 |
| 5 | 103379.61 | 7236.57 | 6897.76 | -338.82 |
| 6 | 103718.43 | 7260.29 | 7173.67 | -86.62 |
| 7 | 103805.06 | 7266.35 | 7460.61 | 194.26 |
| 8 | 103610.80 | 7252.76 | 7759.04 | 506.28 |
| 9 | 103104.52 | 7217.32 | 8069.40 | 852.08 |
| 10 | 102252.44 | 7157.67 | 8392.17 | 1234.50 |
| 11 | 101017.93 | 7071.26 | 8727.86 | 1656.61 |
| 12 | 99361.33 | 6955.29 | 9076.98 | 2121.68 |
| 13 | 97239.65 | 6806.78 | 9440.05 | 2633.28 |
| 14 | 94606.37 | 6622.45 | 9817.66 | 3195.21 |
| 15 | 91411.16 | 6398.78 | 10210.36 | 3811.58 |
| 16 | 87599.57 | 6131.97 | 10618.78 | 4486.81 |
Principal repaid = $4486.81
Workings
Step 2:Amortization table
Add Answer to:
possible answers are 4486, 5398,5552, 2997, 6512
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