Question

Excel Online Structured Activity: Amortization schedule The data on a loan has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet a. Complete an amortization schedule for a $10,000 loan to be repaid in equal installments at the end of each of the next three years. The interest rate is 6% compounded annually. Round all answers to the nearest cent. Ending Beginning Balance Repayment of Principal Payment Interest Balance A 0 Year 1 2 3 $ $ $ A 0 A 0 b. What percentage of the payment represents interest and what percentage represents principal for each of the three years? Round all answers to two decimal places. % Principal % Interest Year 1: Year 2: Year 3: c. Why do these percentages change over time? I. These percentages change over time because even though the total payment is constant the amount of interest paid each year is declining as the remaining or outstanding balance declines. II. These percentages change over time because even though the total payment is constant the amount of interest paid each year is increasing as the remaining or outstanding balance declines. III. These percentages change over time because even though the total payment is constant the amount of interest paid each year is declining as the remaining or outstanding balance increases. IV. These percentages change over time because even though the total payment is constant the amount of interest paid each year is increasing as the remaining or outstanding balance increases. V. These percentages do not change over time; interest and principal are each a constant percentage of the total payment.

Answer 1

Amortization schedule
Loan amount to be repaid(PV)	$10,000
Interest rate®	6%
Lengh of loan (in years)	3
a. Setting up amortization table		Formula
Calculation of loan payment	$3,741.10	PMT(6%,3,-10000)
Year	Beginning balance	Payment	Interest	Repayment of pricipal	Remaining bal.
1	$10,000	$3,741.10	$600	$3,141.10	$6,858.90
2	$6,858.90	$3,741.10	$412	$3,329.56	$3,529.34
3	$3,529.34	$3,741.10	$212	$3,529.34	$0.00
b. % of payment representing interest and principal
Year	Payment % representing interest	Payment % representing principal	Check total = 100%
1	16.04%	83.96%	100.00%
2	11.00%	89.00%	100.00%
3	5.66%	94.34%	100.00%

In Image format:

D E $10,000 6% 1 Amortization schedule 2 3 Loan amount to be repaid (PV) 4. Interest rate® 5 Lengh of loan in years) 6 7 a. Setting up amortization table 8 Calculation of loan payment 9 Formula $3,741.10 PMT(6%,3,-10000) Repayme nt of Interest pricipal $600 $3,141.10 $412 $3,329.56 $212 $3,529.34 Remainin g bal. $6,858.90 $3,529.34 $0.00 Beginning 10 Year balance Payment 11 $10,000 $3,741.10 12 $6,858.90 $3,741.10 13 $3,529.34 $3,741.10 14 15 b. % of payment representing interest and principal Payment % Payment % representing representing 16 Year interest principal 17 16.04% 83.96% 18 11.00% 89.00% 19 5.66% 94.34% 20 Check total = 100% 100.00% 100.00% 100.00% WN

Formulas image:

Amortization schedule Loan amount to be repaid (PV) Interest rate Lengh of loan in years) 10000 0.06 a. Setting up amortization table Calculation of loan payment =PMT(B4,B5,-B3) Formula PMT(6%,3,-10000) Year Payment =B8 Beginning balance =B3 =F11 =F12 Interest =B11* $B$4 =B12*$B$4 =B13*$B$4 Repayment of pricipal =C11-011 =C12-D12 =C13-D13 Remaining bal. =B11-E11 =B12-E12 =B13-E13 =C11 =C12 b. % of payment representing interest and principal =A10 Payment % representing interest =D11/C11 =D12/C12 =D13/C13 Payment % representing principal =E11/C11 =E12/C12 =E13/C13 Check total = 100% =SUM(B17:C17) =SUM(B18:018) =SUM(B19:019)

*please let me know if you face any difficulty while calculating these values in spreadsheet. Please give your valuable feedback.