Question

Question 4 You contract a loan of 90,0000AED on 4 years. The interest rate is 6 % compounded annually. Construct an amortization schedule for the loan repayment. (5 Marks)

Answer 1

According to the given statement the contract loan is for 90000 for 4 years with interest rate at 6%.

For the 1st year instalment the Payment can be made for 30,400.

As the interest rate is calculated on the total amount of 90000 at 6% interest rate.

In the second instalment the payment will be made for 28900.

As the isterest is calculated for the remaining amount which is 65000.

In the third instalment the payment is made for 22400.

As the third instalment is calculated for the remaining amount of 40000.

In the fourth instalment the payment was made for 21200.

As the interest was calculated for the remaining amount of 20000.

Accordingly the total amount which is to be paid for 4 years at compounding interest at 6% is the 1,02,900.