Question

**Problem 4-20**

Amortization Schedule

Consider a $10,000 loan to be repaid in equal installments at the end of each of the next 5 years. The interest rate is 7%.

- Set up an amortization schedule for the loan. Round your
answers to the nearest cent. Enter "0" if required
Year Payment Repayment Interest Repayment of Principal Balance 1 $ $ $ $ 2 $ $ $ $ 3 $ $ $ $ 4 $ $ $ $ 5 $ $ $ $ Total $ $ $ - How large must each annual payment be if the loan is for
$20,000? Assume that the interest rate remains at 7% and that the
loan is still paid off over 5 years. Round your answer to the
nearest cent.

$ - How large must each payment be if the loan is for $20,000, the
interest rate is 7%, and the loan is paid off in equal installments
at the end of each of the next 10 years? This loan is for the same
amount as the loan in part b, but the payments are spread out over
twice as many periods. Round your answer to the nearest cent.

$

Why are these payments not half as large as the payments on the loan in part b?

-Select-VIVIIIIIIItem 26

**I.**Because the payments are spread out over a longer time period, less interest is paid on the loan, which raises the amount of each payment.

**II.**Because the payments are spread out over a longer time period, less interest is paid on the loan, which lowers the amount of each payment.

**III.**Because the payments are spread out over a shorter time period, more interest is paid on the loan, which lowers the amount of each payment.

**IV.**Because the payments are spread out over a longer time period, more interest must be paid on the loan, which raises the amount of each payment.

**V.**Because the payments are spread out over a longer time period, more principal must be paid on the loan, which raises the amount of each payment.

Answer #1

a

PVOrdinary Annuity = C*[(1-(1+i/100)^(-n))/(i/100)] |

C = Cash flow per period |

i = interest rate |

n = number of payments |

10000= Cash Flow*((1-(1+ 7/100)^-5)/(7/100)) |

Cash Flow = 2438.91 |

Annual rate(M)= | yearly rate/1= | 7.00% | Annual payment= | 2438.91 | |

Year | Beginning balance (A) | Annual payment | Interest = M*A | Principal paid | Ending balance |

1 | 10000.00 | 2438.91 | 700.00 | 1738.91 | 8261.09 |

2 | 8261.09 | 2438.91 | 578.28 | 1860.63 | 6400.46 |

3 | 6400.46 | 2438.91 | 448.03 | 1990.87 | 4409.59 |

4 | 4409.59 | 2438.91 | 308.67 | 2130.24 | 2279.35 |

5 | 2279.35 | 2438.91 | 159.55 | 2279.35 | 0.00 |

Where |

Interest paid = Beginning balance * Annual interest rate |

Principal = Annual payment – interest paid |

Ending balance = beginning balance – principal paid |

Beginning balance = previous Year ending balance |

b

PVOrdinary Annuity = C*[(1-(1+i/100)^(-n))/(i/100)] |

C = Cash flow per period |

i = interest rate |

n = number of payments |

20000= Cash Flow*((1-(1+ 7/100)^-5)/(7/100)) |

Cash Flow = 4877.81 |

c

PVOrdinary Annuity = C*[(1-(1+i/100)^(-n))/(i/100)] |

C = Cash flow per period |

i = interest rate |

n = number of payments |

20000= Cash Flow*((1-(1+ 7/100)^-10)/(7/100)) |

Cash Flow = 2847.55 |

d

Amortization Schedule
Consider a $50,000 loan to be repaid in equal installments at
the end of each of the next 5 years. The interest rate is 9%.
Set up an amortization schedule for the loan. Round your
answers to the nearest cent. Enter "0" if required
Year
Payment
Repayment Interest
Repayment of Principal
Balance
1
$
$
$
$
2
$
$
$
$
3
$
$
$
$
4
$
$
$
$
5
$
$
$
$
Total...

Complete an amortization schedule for a $25,000 loan to be
repaid in equal installments at the end of each of the next three
years. The interest rate is 11% compounded annually. Round all
answers to the nearest cent.
Beginning
Repayment
Ending
Year
Balance
Payment
Interest
of Principal
Balance
1
$
$
$
$
$
2
$
$
$
$
$
3
$
$
$
$
$
b. What percentage of the payment represents interest and what
percentage represents principal for...

a. Complete an amortization schedule for a $28,000 loan to be
repaid in equal installments at the end of each of the next three
years. The interest rate is 12% compounded annually. Round all
answers to the nearest cent.
Beginning
Repayment
Ending
Year
Balance
Payment
Interest
of Principal
Balance
1
$
$
$
$
$
2
$
$
$
$
$
3
$
$
$
$
$
b. What percentage of the payment represents interest and what
percentage represents principal...

a. Complete an amortization schedule for a $13,000 loan to be
repaid in equal installments at the end of each of the next three
years. The interest rate is 12% compounded annually. Round all
answers to the nearest cent.
Beginning
Repayment
Ending
Year
Balance
Payment
Interest
of Principal
Balance
1
$
$
$
$
$
2
$
$
$
$
$
3
$
$
$
$
$
b. What percentage of the payment represents interest and what
percentage represents principal...

a. Complete an amortization schedule for a $40,000 loan to be
repaid in equal installments at the end of each of the next three
years. The interest rate is 11% compounded annually. Round all
answers to the nearest cent.
Beginning
Repayment
Ending
Year
Balance
Payment
Interest
of Principal
Balance
1
$
$
$
$
$
2
$
$
$
$
$
3
$
$
$
$
$
b. What percentage of the payment represents interest and what
percentage represents principal...

Complete an amortization schedule for a $46,000 loan to be
repaid in equal installments at the end of each of the next 3
years. The interest rate is 8% compounded annually. If an amount is
zero, enter "0". Do not round intermediate calculations. Round your
answers to the nearest cent.
Beginning
Repayment
Remaining
Year
Balance
Payment
Interest
of Principal
Balance
1
$
$
$
$
$
2
3
What percentage...

Complete an amortization schedule for a $44,000 loan to be
repaid in equal installments at the end of each of the next 3
years. The interest rate is 10% compounded annually. If an amount
is zero, enter "0". Do not round intermediate calculations. Round
your answers to the nearest cent.
Beginning
Repayment
Remaining
Year
Balance
Payment
Interest
of Principal
Balance
1
$
$
$
$
$
2
3
What percentage...

Complete an amortization schedule for a $19,000 loan to be
repaid in equal installments at the end of each of the next three
years. The interest rate is 9% compounded annually. If an amount is
zero, enter "0". Do not round intermediate calculations. Round your
answers to the nearest cent.
Beginning
Repayment
Ending
Year
Balance
Payment
Interest
of Principal
Balance
1
$
$
$
$
$
2
3
What percentage...

Complete an amortization schedule for a $30,000 loan to be
repaid in equal installments at the end of each of the next three
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zero, enter "0". Do not round intermediate calculations. Round your
answers to the nearest cent.
Beginning
Repayment
Ending
Year
Balance
Payment
Interest
of Principal
Balance
1
$
$
$
$
$
2
3
What percentage...

Complete an amortization schedule for a $39,000 loan to be
repaid in equal installments at the end of each of the next 3
years. The interest rate is 6% compounded annually. If an amount is
zero, enter "0". Do not round intermediate calculations. Round your
answers to the nearest cent.
Beginning
Repayment
Remaining
Year
Balance
Payment
Interest
of Principal
Balance
1
$
$
$
$
$
2
3
What percentage...

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