Question

(Round to the nearest cent)

Loan amortization schedule Personal Finance Problem Joan Messineo borrowed $46,000 at a 4% annual rate of interest to be repaid over 3 years. The loan is amortized into three equal, annual, end-of-year payments. a. Calculate the annual, end-of-year loan payment. b. Prepare a loan amortization schedule showing the interest and principal breakdown of each of the three loan payments. c. Explain why the interest portion of each payment declines with the passage of time.

Answer 1

Loan Amount Rate Loan term Yearly payment 46,000.00 Month 4.00% 1 2 16,576.03 3 Beginning Balance Total payment Interest pa Principal Ending balance $ 46,000.00 $ 16,576.03 $1,840.00 $14,736.03 $ 31,263.97 | $ 31,263.97 $ 16,576.03 $1,250.56 $15,325.47 $ 15,938.49 $ 15,938.49 $ 16,576.03 $ 637.54 $15,938.49 $ . $

c)

Interest portion will be on the outstanding monthly principal portion. As the principal declines after repayment, the interest also declines on this outstanding.

Formulae

B 473 Loan Amount 474 Rate 475 Loan term 476 Yearly payment 46000 Month 0.04 =C474+1 =PMT(B474,B475,-B473) =C475+1 Beginning Balance =B473 =H474 =H475 Total payment =$B$476 =$B$476 =$B$476 Interest paid =D474*$B$474 =D475*$B$474 =D476*$B$474 Principal =E474-F474 =E475-F475 =E476-F476 Ending balance =D474-G474 =D475-G475 =D476-6476