Question

1, We borrow S-2000€ with interest rate r-5% during 4 year. we consider a loan of type "Mortgage-Style Amortization". Build the payment schedule and compute the credit cost. 2. We consider a loan of type "Straight-line amortization" with rate 10% and with the following payment schedule 7000 2 3 5500 Complete the payment schedule.

Answer 1

Answer:

Question 1)

S=2000

r=5%

N=4 years

Let A be the payment per month

A=S*r/(1-(1+r)^-N)

A=2000*5%/(1-(1+5%)^-4)

A=564.02

Mortgage-Style Amortization Schedule

Interest paid for year t=Balance Mortgage amount for year t*r

Principle paid for year t=A-Interest Paid for year t

Balance mortgage amount for t years=Balance mortgage amount for t-1 years - Principle paid for year t-1

Year	Balance Mortgage Amount	Payment Per month	Interest Paid	Principle paid	Balance Mortgage Amount
1	2000.00	564.02	100.00	464.02	1535.98
2	1535.98	564.02	76.80	487.22	1048.76
3	1048.76	564.02	52.44	511.58	537.18
4	537.18	564.02	26.86	537.16	0.00

Credit cost=N*A-S=4*564.02-2000=256.08