Question

# Your firm just acquired a bank loan in the amount of \$30,000 at 6% APR. Equal...

Your firm just acquired a bank loan in the amount of \$30,000 at 6% APR. Equal payments are to be made annually at the end of each year for three years. Construct the amortization table.
Year#
Owed
Annual Payment
Principal Reduction
Interest
New Principal
1
\$30,000.00
2
3
Total

Loan Amortization Table

 Year Amount Owed Annual Equal Payments Interest at 6% Principal Repayment Ending Balance 1 \$30,000.00 \$11,223.29 \$1,800.00 \$9,423.29 \$20,576.71 2 \$20,576.71 \$11,223.29 \$1,234.60 \$9,988.69 \$10,588.01 3 \$10,588.01 \$11,223.29 \$635.28 \$10,588.01 \$0

Annual Equal Payment

Interest Rate (r) = 6% per year

Number of Periods = 3 Years

Annual Equal Payment = [P x {r (1+r)n} ] / ( 1+r)n – 1

= [\$30,000 x {0.06 x (1 + 0.06)3}] / (1 + 0.06)6 - 1

= [\$30,000 x {0.06 x 1.191016}] / [1.191016 – 1]

= [\$30,000 x 0.071461] / 0.1910160

= \$11,223.29 per year

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