Question

8. Prepare the loan amortization schedule ($15) You borrow $1,000, and the loan is to be repaid in three equal payments at the end of each of the next three years. The lender charges a 6 percent interest rate on the loan balance that is outstanding at the beginning of each year. 1) Calculate the payment the firm must repay each year. 2) Prepare the loan amortization schedule (fill all the numbers in each cell). Repayment of Remaining Principal Beginning Year Payment Interest paid Amount Balance 2 3 TotalNA NA

Answer 1

Annual payment = Loan = [(1-(1/(1+r^n}}}/r] $374.11 1,000 = [((1-(1/(1.0643)}}/0.06] Year Payment $374.11 Beginning Loan $1,000.00 $685.89 $352.93 Interest paid $60.00 $41.15 $21.18 $122.33 $374.11 principal paid $314.11 $332.96 $352.93 $1,000.00 Balance $685.89 $352.93 $0.00 $374.11 $1,122.33 Total