Question

A person borrows $20,000 at an annual effective interest rate of 5%. The loan is to be repaid in level annual end of year payments over 15 years. Show the row for the amortization schedule at the end of the seventh year.

Answer 1

Ans $ 1926.85

P =	Regular Payments
PV =	Loan Amount
r =	rate of interest
n =	no of periods
P =	r (PV)
	1 - (1 + r )^-n
P =	5%*20000
	1 - (1 / (1 + 5%)^15))
P =	1000
	0.518982902
P =	1926.85

The amortization schedule at the end of the seventh year is as follows:

	Beginning Balance	Interest	Principal	Ending Balance
1	$20,000.00	$1,000.00	$926.85	$19,073.15
2	$19,073.15	$953.66	$973.19	$18,099.97
3	$18,099.97	$905.00	$1,021.85	$17,078.12
4	$17,078.12	$853.91	$1,072.94	$16,005.18
5	$16,005.18	$800.26	$1,126.59	$14,878.59
6	$14,878.59	$743.93	$1,182.92	$13,695.68
7	$13,695.68	$684.78	$1,242.06	$12,453.61