Question

You plan to borrow $47,400 at a 7.5% annual interest rate. The terms require you to amortize the loan with 7 equal end-of-year payments. How much interest would you be paying in Year 2? Support your answer by showing the first two years of the amortization table for this loan:

Year	Beginning Balance	PMT	INT	PRIN	Ending Balance
1
2
Total

Answer 1

Based on excel formula we create amortization schedule

	Beginning Balance= 100000	PMT =PMT(7.5%,7,-47400)	Interest part of PMT=8%*Beginning Principal	Principal part of PMT= PMT-Interest	Ending Balance= Beginning balance-Principal part of PMT
1	$47,400.00	$8,949.13	3555.00	$5,394.13	$42,005.87
2	$42,005.87	$8,949.13	3150.44	$5,798.70	$36,207.17
Total	$89,405.87	$17,898.27	$6,705.44	$11,192.83

Interest paid in year 2 = 6705.44

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