Question

A 5-year loan in the amount of $48,000 is to be repaid in equal annual payments. What is the remaining principal balance after the third payment if the interest rate is 5 percent, compounded annually?

Answer 1

	Rate	Annual Interest rate	5%
	Nper	Number of Years	5
	Pv	Loan amount	$48,000
	PMT	Equal Annual Payment	$11,086.79	(Using PMT function of excel with Rate=5%,Nper=5,Pv=-48000)
		Principal Balance after 3rd payment=Present Value of future payments
	Rate	Annual Interest rate	5%
	Nper	Number of Years left in future=5-3	2
	Pmt	Annual payment	$11,086.79
	PV	Principal Balance after 3rd payment	$20,614.89	(Using PV function of excel with Rate=5%,Nper=2,Pmt=-11086.79)
		SCHEDULE OF PAYMENTS		A	B	C=A*5%	D=B-C	E=A-D
			Year	Beginning Loan Balance	Loan Repayment	Interest	Principal	Ending Loan Balance
			0					$48,000
			1	$48,000	$11,086.79	$2,400	$8,686.79	$39,313.21
			2	$39,313	$11,086.79	$1,966	$9,121.13	$30,192.08
			3	$30,192	$11,086.79	$1,510	$9,577.19	$20,614.89
			4	$20,615	$11,086.79	$1,031	$10,056.05	$10,558.85
			5	$10,559	$11,086.79	$528	$10,558.85	$0.00
									D6 x fc =PMT(D3,D4,-05) D E F G H I J 5% 2 3 Rate 4 Nper 5 PV 6 PMT Annual Interest rate Number of Years Loan amount Equal Annual Payment $48,000 $11,086.79 ! (Using PMT function of excel with Rate=5%,Nper=5,Pv=-48000) 7 012 : X fic =PV(09,010,-011) D B E F G H I 5% Annual Interest rate Number of Years Loan amount Equal Annual Payment $48,000 $11,086.79 (Using PMT function of excel with Rate=5%, Nper=5,Pv=-48000) 1 2 3 Rate 4 Nper 5 Pv 6 PMT 7 8 9 Rate 10 Nper 11 Pmt 12 PV 596 Principal Balance after 3rd payment=Present Value of future payments Annual Interest rate Number of Years left in future=5-3 Annual payment $11,086.79 Principal Balance after 3rd payment $20,614.89 Using PV function of excel with Rate=5%,Nper=2,Pmt=-11086.79