Question

eBook a. Complete an amortization schedule for a $16,000 loan to be repaid in equal installments at the end of each of the next three years. The interest rate is 6% compounded annually. If an amount is zero, enter "O". Do not round intermediate calculations Round your answers to the nearest cent. Beginning Repayment Ending Year nteres nc b. What percentage of the payment represents interest and what percentage represents principal for each of the three years? Do not round intermediate calculations. Round your answers to two decimal places % Interest % Principal Year 1: Year 2: Year 3: Why do these percentages change over time? I. These percentages change over time because even though the total payment is constant the amount of interest paid each II. These percentages change over time because even though the total payment is constant the amount of interest paid each III. These percentages change over time because even though the total payment is constant the amount of interest paid each IV. These percentages change over time because even though the total payment is constant the amount of interest paid each V. These percentages do not change over time; interest and principal are each a constant percentage of the total payment. year is declining as the remaining or outstanding balance declines year is increasing as the remaining or outstanding balance declines year is declining as the remaining or outstanding balance increases year is increasing as the remaining or outstanding balance increases

Answer 1

Annual payment $5,985.76 16,000(1-(1/(1.06A3)/0.06] Beginning balance $16,000.00 $10,974.24 $5,646.94 ment repayment of Principal Ending balance Payment Interest $5,985.76 $5,985.76 $5,985.76 ear $960.00 $658.45 $338.82 $5,025.76 $5,327.30 $5,646.94 $10,974.24 $5,646.94 $0.00 2 % Interest 16.04% % Principal 83.96% Year 960+5985.76] [ 5025.765985.76] 658.455985.76] [5327.30 +5985.76] [338.82 5985.76] [5646.94 +5985.76] 2 11.00% 89.00% 5.66% 94.34% These percentages change over time because even though the total payment is constant the amount of interest paid each year is declinng as the remaining or outstanding balance declines