Question

Accounting Question

$943,000 Loan Interest Rate Life (years) Date of Loan 43 Use the installment method - not straight line Do NOT round any interrmediate numbers. Do NOT turn this into a monthly problem. a) What is the annual payment? b) What are the total interest payments? c) After 17 payments have been made, what percentage of the total interest has been paid (round to the nearest percentage point)? d) After 17 payments have been made, what percentage of the total principal has been paid (round to the nearest percentage point)? Redo the problem if the interest rate is e) What is the annual payment? What are the total interest payments? g) After 17 payments have been made, what percentage of the total interest has been paid (round to the nearest percentage point)? h) After 17 payments have been made, what percentage of the total principal has been paid (round to the nearest percentage point)? 2.00%

Answer 1

	Pv	Loan amount	$943,000
	Rate	Interest Rate	17.80%
	Nper	Life of loan in years	43
a)	PMT	Annual Payment	$168,000.58	(Using PMT function of excel with Rate=17.80%,Nper=43, Pv=-943000)
		Excel command: PMT(17.8%,43,-943000)
		Total Payment =168000.58*43	$7,224,024.77
	b)	Total Interest payment	$6,281,024.77	(7224024.77-943000)
	FV1	Future Value of Payments after 17 years	$14,344,530.03	(Using FV function of excel with Rate=17.80%,Nper=17, Pmt=-168000.58)
		Excel command: FV(17.8%,17,-168000.58)
	FV2	Future value of Loan after 17 years	$15,275,014.47	(Using FV function of excel with Rate=17.80%,Nper=17, Pv=-943000)
		Excel command: FV(17.8%,17,,-943000)
	FV2-FV1	Loan balance after 17 years	$930,484.44
		Principal payment in 17 years	$12,515.56	(943000-930484.44)
		Total payment in17 years	$2,856,009.79	(168000.58*17)
		Interest payment in 17 years	$2,843,494.24	(2856009.79-12515.56)
	c)	Percentage of total interest paid	45%	(2843494/6281024.77)
	d)	Percentage of total Principal paid	1%	(12515.56/943000)
		If Interest rate is=2%
e)	PMT	Annual Payment	$32,901.21	(Using PMT function of excel with Rate=2%,Nper=43, Pv=-943000)
		Excel command: PMT(2%,43,-943000)
		Total Payment =32901.21*43	$1,414,751.91
	f)	Total Interest payment	$471,751.91	(1414751.91-943000)
	FV1	Future Value of Payments after 17 years	$658,421.35	(Using FV function of excel with Rate=2%,Nper=17, Pmt=-32901.21)
		Excel command: FV(2%,17,-32901.21)
	FV2	Future value of Loan after 17 years	$1,320,427.66	(Using FV function of excel with Rate=2%,Nper=17, Pv=-943000)
		Excel command: FV(2%,17,,-943000)
	Fv2-Fv1 Loan balance after 17 years $662,006.31 Principal payment in 17 years $280,993.69 (943000-662006.31) Total payment in17 years $559,320.57 (32901.21*17) Interest payment in 17 years $278,326.88 (559320.57-280993.69) g) Percentage of total interest paid 59% (278326.88/471751.91) h) Percentage of total Principal paid 30% (280993.69/943000)