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 of the payment represents interest and what percentage represents principal for each of the three years? Do not round intermediate calculations. Round your answers to two decimal places.
% Interest | % Principal | |
Year 1: | % | % |
Year 2: | % | % |
Year 3: | % | % |
Why do these percentages change over time?
Annual installment = Amount of Loan/PVAF | |||||
=19000/PVAF(9%, 3 years) | |||||
=19000/2.531295 | |||||
=$7506.04 | |||||
a. | Repayment | Ending | |||
Year | Beg. Balance | Payment | Interest | of Principal | Balance |
1 | 19,000.00 | 7,506.04 | 1,710.00 | 5,796.04 | 13,203.96 |
2 | 13,203.96 | 7,506.04 | 1,188.36 | 6,317.68 | 6,886.28 |
3 | 6,886.28 | 7,506.04 | 619.76 | 6,886.28 | 0.00 |
% Interest | % Principal | ||||
Year 1: | 22.78% | 77.22% | |||
Year 2: | 15.83% | 84.17% | |||
Year 3: | 8.26% | 91.74% | |||
I.These percentages change over time because even though the total payment is constant the amount of interest paid each year is declining as the remaining or outstanding balance declines. |
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