Question

you have just taken out an installment loan totaling $36,000 for a 1971 Ford Mach 1 Mustang at a 6% interest rate, to be repaid over three years with equal annual payments. Complete the loan table below including the column headings.

please SHOW WORK!

				2400
YEAR 1
YEAR 2
YEAR 3

Answer 1

PVOrdinary Annuity = C*[(1-(1+i/100)^(-n))/(i/100)]

C = Cash flow per period

i = interest rate

n = number of payments

36000= Cash Flow*((1-(1+ 6/100)^-3)/(6/100))

Cash Flow = 13467.95 = annual installment

	Annual rate(M)=	yearly rate/1=	6.00%	Annual payment=	13467.95
Year	Beginning balance (A)	Annual payment	Interest = M*A	Principal paid	Ending balance
1	36000.00	13467.95	2160.00	11307.95	24692.05
2	24692.05	13467.95	1481.52	11986.43	12705.62
3	12705.62	13467.95	762.34	12705.62	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