Homework Answers
1) If the cost is 80000 and the sown payment in 20000, then the loan amount is 60000
We are given the following information:
| r | 7.00% |
| n | 25 |
| frequency | 1 (Annual) |
| PV or the loan amount | $ 60,000.00 |
We need to solve the following equation to arrive at the required annual payment or PMT:
So the annual PMT is $60000
Following will be the amortization schedule:
- Opening balance = previous year's closing balance
- Closing balance = Opening balance+Loan-Principal repayment
- PMT is calculated as per the above formula
- Interest = 0.07 x opening balance
- Principal repayment = PMT - Interest
Below is the graph of interest and principal components of the annual payments:
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