If you buy a store worth $240,000 with 15 percent down. The balance is to be...
If you buy a store worth $240,000 with 15 percent down. The balance is to be paid off with equal annual payments at the end of each year over 30 years at a 5.6 percent rate of interest. What is the amount of the annual payment? $14,191.68 $14,225.64 $14,254.76 $14,289.37 $14,311.15
Homework Answers
Store worth = $240,000
- Down payment = 15%; Down payment amount = 15% * $240,000 = $36,000
- Balance amount = $240,000 - $36,000 = $204,000
This amount is paid at the end of every year for 30 years, with interest rate = 5.60% p.a
- $204,000 = C/(1+0.056)^1 + C/(1+0.056)^2 + ...+ C/(1+0.056)^29 + C/(1+0.056)^30
- Solving for C, we get C = $14,191.68
Below is the amortization schedule for the loan:
EAI = Equated Annual Installment
| Year | EAI | Interest paid | Principal paid | Bal o/s |
| 1 | $14,191.68 | 11424 | $2,767.68 | $201,232.32 |
| 2 | $14,191.68 | $11,269.01 | $2,922.67 | $198,309.64 |
| 3 | $14,191.68 | $11,105.34 | $3,086.34 | $195,223.30 |
| 4 | $14,191.68 | $10,932.50 | $3,259.18 | $191,964.12 |
| 5 | $14,191.68 | $10,749.99 | $3,441.69 | $188,522.43 |
| 6 | $14,191.68 | $10,557.26 | $3,634.43 | $184,888.00 |
| 7 | $14,191.68 | $10,353.73 | $3,837.95 | $181,050.05 |
| 8 | $14,191.68 | $10,138.80 | $4,052.88 | $176,997.17 |
| 9 | $14,191.68 | $9,911.84 | $4,279.84 | $172,717.33 |
| 10 | $14,191.68 | $9,672.17 | $4,519.51 | $168,197.81 |
| 11 | $14,191.68 | $9,419.08 | $4,772.61 | $163,425.21 |
| 12 | $14,191.68 | $9,151.81 | $5,039.87 | $158,385.34 |
| 13 | $14,191.68 | $8,869.58 | $5,322.10 | $153,063.23 |
| 14 | $14,191.68 | $8,571.54 | $5,620.14 | $147,443.09 |
| 15 | $14,191.68 | $8,256.81 | $5,934.87 | $141,508.22 |
| 16 | $14,191.68 | $7,924.46 | $6,267.22 | $135,241.00 |
| 17 | $14,191.68 | $7,573.50 | $6,618.19 | $128,622.81 |
| 18 | $14,191.68 | $7,202.88 | $6,988.81 | $121,634.00 |
| 19 | $14,191.68 | $6,811.50 | $7,380.18 | $114,253.83 |
| 20 | $14,191.68 | $6,398.21 | $7,793.47 | $106,460.36 |
| 21 | $14,191.68 | $5,961.78 | $8,229.90 | $98,230.45 |
| 22 | $14,191.68 | $5,500.91 | $8,690.78 | $89,539.68 |
| 23 | $14,191.68 | $5,014.22 | $9,177.46 | $80,362.21 |
| 24 | $14,191.68 | $4,500.28 | $9,691.40 | $70,670.82 |
| 25 | $14,191.68 | $3,957.57 | $10,234.12 | $60,436.70 |
| 26 | $14,191.68 | $3,384.46 | $10,807.23 | $49,629.47 |
| 27 | $14,191.68 | $2,779.25 | $11,412.43 | $38,217.04 |
| 28 | $14,191.68 | $2,140.15 | $12,051.53 | $26,165.51 |
| 29 | $14,191.68 | $1,465.27 | $12,726.41 | $13,439.09 |
| 30 | $14,191.68 | $752.59 | $13,439.09 | ($0.00) |
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