Homework Answers
Answer :
In the present case, company borrowed $100,000 from the bank at 12% for 15 years on 1st February. The interest rate for the one month will be as shown below
Interest for one month
= Interest % per annum / Total months
= 12%/12
= 1% per month
(a). Interest payment for February = Total loan * Interest % per month / 100
= $100,000*1/100
= $1,000
The total interest portion in EMI of $1470 for month of February is $1,000
As the interest payment of February is $1,000 remaining amount will be towards principal portion. calculate the principal amount using the equation as shown below
Principal payment = Total EMI - Interest payment
Principal payment = $1,470 - $1,000
Thus, principal payment for the month of February is $470
(b).Calculate the balance of loan outstanding after the month of February as shown in below
Loan outstanding = Opening balance - Principal paid
= $1,00,000 - $470
= $99,530
Closing balance at the end of February is $99,530
Now new loan amount $99,530 and 1% is the nearest amount for the month of Marc. Out of EMI $1,470 finds interest amount and principal amount. Calculate the loan amount using the equation is shown below
Interest payment for March = Total loan * Interest % per month / 100
= $99,530*1/100
= $995
Interest for the month of March is $995 so remaining amount of EMI is towards principal payment. Calculate the same using the equation as shown below
Principal payment = Total EMI - Interest payment
= $1,470 -$995
= $475
Thus, principal payment for month of March is $475
Calculate the balance of loan outstanding after the month of March as shown below
Loan outstanding = Opening balance - Principal paid
= $1,00,000 - $470 - $475
=$99,055
Thus, loan amount for month of April is $99,055
(c). T o compute carrying value on April 30, find out the loan amount after the EMI payment for the month of April. Calculate the payment for the month of April using equation as shown below
Interest payment for April = Total loan * Interest % per month /100
$99,055*1/100
$990.55
Round the nearest dollar is $990.55. The remaining amount is towards the settlement of principal payment. Calculate the same using the equation as shown below
Principal payment = Total EMI - Interest payment
= $1,470 - $991
= $479
Thus, interest payment for April is $991 and principal amount is $479 makes a total of $1,470.
Total carrying value of the note by 30 April is total loan amount minus loan paid till yet .
Calculate the same using the end of April = Total loan amount - Loan paid in February - Loan paid in March - Loan paid in April
= $1,00,000 - $470 - $475 - $479
= $98,576
Thus, the total carrying amount of loan at the end of the month is $98,576
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