Question

Suppose you borrowed $95,000 at a rate of 8.5% and must repay it in 5 equal installments at the end of each of the next 5 years. By how much would you reduce the amount you owe in the first year?

Answer 1

$ 16,032.75

Step-1:Calculation of annual payment
Annual payment	=-pmt(rate,nper,pv,fv)
	=$ 24,107.75
Where,
rate	=	Interest rate	=	8.50%
nper	=	Number of perid	=	5
pv	=	Loan amount	=	$95,000
fv	=	Value of loan at the end of 5 years	=	$0
Step-2:Loan amortization schedule for 5 years
Year ended	Beginning Loan	Annual Payment	Annual Interest	Principal reduction	Ending Loan
	a	b	c=a*8.50%	d=b-c	e=a-d
1	95,000.00	24,107.75	8,075.00	16,032.75	78,967.25
2	78,967.25	24,107.75	6,712.22	17,395.53	61,571.72
3	61,571.72	24,107.75	5,233.60	18,874.15	42,697.57
4	42,697.57	24,107.75	3,629.29	20,478.45	22,219.12
5	22,219.12	24,107.75	1,888.63	22,219.12	-0.00