Question

22. Problem 5.22 (Loan Amortization) eBook Jan sold her house on December 31 and took a $15,000 mortgage as part of the payment. The 10-year mortgage has a 7% nominal interest rate, but it calls for semiannual payments beginning next June 30. Next year lan must report on schedule of her IRS Form 1040 the amount of interest that was induded in the two payments she received during the year, a. What is the dollar amount of each payment lan receives? Round your answer to the nearest cent b. How much interest was induded in the first payment? Round your answer to the nearest Cent. How much repayment of principal was included? Do not round intermediate calculations. Round your answer to the nearest cant. How do these values change for the second payment 1. The portion of the payment that is applied to interest dedines, while the portion of the payment that is applied to principal increases II. The portion of the payment that is applied to interest increases, while the portion of the payment that is plied to principal decreases 111. The portion of the payment that is applied to interest and the portion of the payment that is applied to principalemana the same throughout the life of the loan. IV. The portion of the payment that is applied to interest declines, while the portion of the payment that is applied to principal also declines V. The portion of the payment that is apolled to interest increases while the portion of the payment that applied to principal increases c. How much interest mustjan report on schedules for the first year? Do not round intermediate calaton Round your ser to the nearest cent NO" TOSHIBA

Answer 1

We have to compute the following answers for the questions:

Using Excel formula, we can compute the following answers:

Annual Interest Rate	7%
Years	10
Payments per Year	2
Amt	15000

We use the PMT function to calculate the monthly payment on a loan with an annual interest rate of 7%, a 2-year duration and a present value (amount borrowed) of $15,000.

=PMT(AnnualInterestRate/PaymentsPerYear, Years*PaymentsPerYear Amount)

Use the PPMT function to calculate the principal part of the payment.

=PPMT(AnnualInterest Rate/PaymentsPerYear, A7, Years PaymentsPerYear, Amount)

Use the IPMT function to calculate the interest part of the payment.

IPMT(AnnualInterestRate/PaymentsPerYear, A7, Years*PaymentsPerYear, Amount)

Update the balance. 15000 + ($530.42)

=Amount+C7

Period	Payment	payment of principal	interest	ending Bal	Beginning Bal Amt
1	($1,055.42)	($530.42)	($525.00)	$14,469.58	$15,000
2	($1,055.42)	($548.98)	($506.44)	$13,920.60	$14,469.58
Total			($1,031.44)

a. ($1,055.42)

b. Payt 1: Int ($525.00) Princ = $530.42

Payt 2: Int ($506.44) Princ = $548.98

c. Interest is going to be $1031.44 to be shown in schedule B for the first year.

d. IV. interest payable decreases accordingly (even though thesemi-annual payments remain fixed) and repayment of principal declines.