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Loan Amortization GIVEN: A $12,000 4-year loan at 5%. FIND for each year: a. Annual loan...

Loan Amortization

GIVEN: A $12,000 4-year loan at 5%.

FIND for each year:

a. Annual loan payment

b. Beginning-of-year balance

.c. Annual interest

d. Annual principal

e. End-of-year balance

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Homework Answers

Answer #1

Loan Amount = $12,000
Time Period = 4 years
Interest Rate = 5%

Let Annual Payment be $x

$12,000 = $x/1.05 + $x/1.05^2 + $x/1.05^3 + $x/1.05^4
$12,000 = $x * (1 - (1/1.05)^4) / 0.05
$12,000 = $x * 3.545951
$x = $3,384.14

Annual Payment = $3,384.14

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