A $100,000 loan requires equal annual end-of-year payments of $38,803.35 for three years. a. What is...
A $100,000 loan requires equal annual end-of-year payments of $38,803.35 for three years.
a. What is the annual interest rate?
b. Construct a loan amortization schedule to include the amount of interest and principal paid each year as well as the remaining balance at the end of each year.
Enter the last principal number in year 3: for example in problem 13: you would enter 5735.84 (which was the last principal for 4 years).
Homework Answers
Answer a.
Amount borrowed = $100,000
Annual payment = $38,803.35
Number of payments = 3
Let annual interest rate be i%
$100,000 = $38,803.35 * PVIFA(i%, 3)
PVIFA(i%, 3) = 2.57710
Using financial calculator, i = 8%
Annual interest rate = 8.00%
Answer b.
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