Homework Answers
a. Annual year end payments = 5000 / PVAF( 6%,3) = 5000 / 2.673011 = 1870.55
PVAF:
| Year | PVF @6% |
| 1 | 0.943396226 |
| 2 | 0.88999644 |
| 3 | 0.839619283 |
| Total | 2.673011949 |
b.
| Year | Installment | Interest | Reduction in principle | Principal O/s |
| 0 | 5,000 | |||
| 1 | 1870.55 | 300 | 1570.55 | 3,429 |
| 2 | 1870.55 | 205.767 | 1664.783 | 1,765 |
| 3 | 1870.55 | 105.88002 | 1764.66998 | 0 |
| Total | 611.65 |
c. Total interest = 611.65
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