Question

CTL (Concrete Testing Lab) borrowed $160,000 for new equipment at 9% per year, compounded quarterly. It is to be paid back over 4 years in equal quarterly payments.

1)How much interest is in the 6th payment?

2)How much principal is in the 6th payment?

3)What principal is owed immediately following the 6th payment?

Answer 1

Total Borrowing: $ 160,000
Annual rate of interest: 9%
Quarterly interest: 2.25%
Present value factor for 16 payment at 2.25% is 13.313
Therefore, Quarterly Payment ($ 160,000 /13.313) = $ 12018
Period	Principal Amount in Begin.		Total Payment	Interest	Principal	Principal Outstanding at end
1	160000		12018	3600	8418	151582
2	151582		12018	3410.595	8607.405	142974.6
3	142974.6		12018	3216.928	8801.072	134173.5
4	134173.5		12018	3018.904	8999.096	125174.4
5	125174.4		12018	2816.425	9201.575	115972.9
6	115972.9		12018	2609.389	9408.611	106564.2
Req 1: As computed, the interest in 6th payment is $ 2609.39
Req 2: As computed, the principal payment included in 6th payment is $ 9408.61
Req 3: As computed, the principal amount outstanding after 6th payment is $ 106,564