Question

Prescott Bank offers you a five-year loan for $56,000 at an annual interest rate of 6.75...

Prescott Bank offers you a five-year loan for $56,000 at an annual interest rate of 6.75 percent. What will your annual loan payment be?

Homework Answers

Answer #1
Annual rate(M)= yearly rate/12= 6.75% Annual payment= 13566.58
Year Beginning balance (A) Annual payment Interest = M*A Principal paid Ending balance
1 56000.00 13566.58 3780.00 9786.58 46213.42
2 46213.42 13566.58 3119.41 10447.18 35766.24
3 35766.24 13566.58 2414.22 11152.36 24613.88
4 24613.88 13566.58 1661.44 11905.14 12708.74
5 12708.74 13566.58 857.84 12708.74 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
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