Question

Prepare an amortization schedule for a five-year loan of $33,000. The interest rate is 9% per year, and the loan calls for equal annual payments. (Do not round intermediate calculations. Enter all amount as positive value. Round the final answers to 2 decimal places. Leave no cells blank - be certain to enter "0" wherever required.) Beginning Balance $ Total Payment $ Interest Payment $ Principal Payment $ Year Ending Balance $ 2 3 4 5 How much interest is paid in the third year? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Interest paid $ How much total interest is paid over the life of the loan? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Total interest $

Answer 1

Loan amount = $33,000
Interest rate = 9%
Number of payments = 5

Let annual payment be $x

$33,000 = $x/1.09 + $x/1.09^2 + $x/1.09^3 + $x/1.09^4 + $x/1.09^5
$33,000 = $x * (1 - (1/1.09)^5) / 0.09
$33,000 = $x * 3.889651
$x = $8,484.05

Annual payment = $8,484.05

Answer a.

Year 1 2 Beginning Total Payment Balance 33,000.00 $ 8,484.05 $ 27.485.95 $ 8,484.05 $ 21,475.64 $ 8,484.05 $ 14,924.40 $ 8,484.05 $ 7,783.55$ 8,484.05$ $ $ $ $ $ Interest Payment 2,970.00 $ 2,473.74 $ 1,93 2.81 $ 1,343.20 $ 700.50 $ Principal Ending Balance Payment 5,514.05$ 27,485.95 6,010.31 $ 21,475.64 6,551.24 $ 14,924.40 7,140.85$ 7,783.55 7,783.55$ 3 4 5

Answer b.

Interest paid in third year is $1,932.81

Answer c.

Total interest paid = $2,970.00 + $2,473.74 + $1,932.81 + $1,343.20 + $700.50
Total interest paid = $9,420.25