Question

You are taking out a $13395 loan. It will be amortized with fixed payments over 10 years. It is to be paid quarterly and the APR is 4%.

What is the interest payment on the loan in the second quarter?

Answer 1

Loan Amount = $13,395

Time Period = 10 years

Interest Rate = 4% quarterly

Loan has quarterly Payments,

So,

Period = 4*10 = 40

Interest Rate = 1% per quarter

Calculating Quarterly Payment,

Using TVM Calculation,

PMT = [PV = 13395, FV = 0, T = 40, I = 0.01]

PMT = $407.95

So,

Principal Payment in Quarter 1 = 407.95 - (0.01)(13395) = $274

Principal Due = $13,121

Interest Payment in Quarter 2 = 0.01(13121) = $131.21

So,

Interest payment in Quarter 2 = $131.21

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