Question

Consdera $35.000 loan to be repaid in equal installments at the end of each of the next years. The rest is a Set up an amortization schedule for the loan. Do not round intermediate calculations, Round your answers to the nearest cent. If netry is required, enter Repayment Interest Regayment of Principal Balance Total . How large must each annual payment be if the loan is for $70,0007 Assume that the interest rate remains round intermediate calculations. Round your answer to the nearest cert and that the loan is s aid off over 5 years. Do not c. How large must each payment be the loan is for $70,000, the interest rate is 6%, and the loan is paid of in equal installments at the end of each of the next 10 years? This loan is for the same amount as the loan in part, but the payments are spread out over twice as many periods. Do not round intermediate c o n Round your answer to the nearest cent.

Answer 1

Answer a.

Amount Borrowed = $35,000
Interest Rate = 6%
Number of Payments = 5

Annual Payment = $35,000 / PVA of $1 (6%, 5)
Annual Payment = $35,000 / 4.21236
Annual Payment = $8,308.88

Year 2 3 4 Repayment Repayment of Payment Balance Interest Principal $ 8,308.88 $ 2,100.00 $ 6,208.88 $ 28,791.12 $ 8,308.88 $ 1,72747$ 6,581.41 $ 22,209.71 $ 8,308.88 $ 1,332.58 $ 6,976.30 $ 15,233.41 $ 8,308.88 $ 914.00 $ 7,394.88 $ 7,838.53 $ 8,308.88 $ 470.35 $ 7,838.53 $ 0.00 $ 41,544.40 $ 6,544 40 $ 35,000.00 Total

Answer b.

Amount Borrowed = $70,000
Interest Rate = 6%
Number of Payments = 5

Annual Payment = $70,000 / PVA of $1 (6%, 5)
Annual Payment = $70,000 / 4.21236
Annual Payment = $16,617.76

Answer c.

Amount Borrowed = $70,000
Interest Rate = 6%
Number of Payments = 10

Annual Payment = $70,000 / PVA of $1 (6%, 10)
Annual Payment = $70,000 / 7.36009
Annual Payment = $9,510.75

Because the payments are spread out over a longer time period, more interest must be paid on the loan, which raises the amount of each payment.