Question

19. Complete an amortization schedule for a $25,000 loan to be repaid in equal installments at the end of each of the next 4 years. The interest rate is 10% compounded annually.

Please compute the following:

                   Beg. Balance        Payment       Interest     

Year 3               X                         Y                 Z        

A X= $ 13,687.78 ; Y= $7,886.77    ; Z= $1,368.78
B. X= $ 17,441.13 ; Y= $10,886.87 ; Z= $2,500.00
C. X= $ 9,138.97   ; Y= $7,886.77    ; Z= $2,500.00
D. X= $ 7,552.87   ; Y= $9,052.87    ; Z= $1,744.71
E. X= $ 9,138.97   ; Y= $10,052.87   ; Z= $1,744.71

20. Using the information from Q19, what would be the ending balance (remaining balance) of year 3?

A. $3,522.08
B. $4,647.21
C. $6,250.09
D. $5,476.79
E. $7,169.79

Answer 1

Amount of Loan	25000
X PV factor of $1 annuity	3.16987	=(1-(1.10)^-4)/0.10
Amount of equal installment	7886.77
	Beg. Balance	Payment	Interest	Reduction in loan	End. Bal.
	X	Y	Z
Year 1	25000	7886.77	2500	5386.77	19613.23
Year 2	19613.23	7886.77	1961.32	5925.45	13687.78
Year 3	13687.78	7886.77	1368.78	6517.99	7169.79
Year 4	7169.79	7886.77	716.98	7169.79	0.00
19
X= $ 13,687.78 ; Y= $7,886.77    ; Z= $1,368.78
Option A is correct
20
Ending balance (remaining balance) of year 3	7169.79
Option E is correct