Question

Assume you borrow $50,000 at 10% per year in- terest and you agree to repay the loan in five equal annual payments. What is the amount of the unre- covered balance immediately after you make the third payment? both excel and hand solutions , please capture the excel solution.

Answer 1

Loa amount = 50000

Loan interest rate = 10%

loan term = 5 yrs

annual loan payments = 50000*(A/P,10%,5) = 50000*0.263797 = 13189.87

No of Payment left after third payment = 5 - 3 = 2

Principal left to be paid = 13189.87 * (P/A,10%,2) = 13189.87 * 1.735537 = 22891.51

Excel solution

interest rate	10%
Loan term (yrs)	5
Loan amount	50000
Annual payment	13,189.87
No. Of payments left after 3rd payment	2
Principal Due after 3rd payment	22,891.52

Showing formula in excel

interest rate	0.1
Loan term (yrs)	5
Loan amount	50000
Annual payment	=PMT(G33,G34,-G35)
No. Of payments left after 3rd payment	=G34-3
Principal Due after 3rd payment	=PV(G33,G37,-G36)