Question

Janet wanted to buy a car so she borrowed a $10,000 from HSBC Bank at a 10% annual rate of interest to be repaid quarterly over 2 years. The loan is amortized into eight equal quarterly payments. a. Calculate the quarterly loan payment (A). b. Prepare the loan amortization schedule.

Answer 1

	Given that -
	Borrowed amount =		10,000
	Interest rate =		10%	compounded quarterly
	Number of quarter =	8
Ans a)
	Computation of quarterly loan payment
	we have to use financial calculator to solve this
	put in calculator
	FV		0
	PV		-10,000
	I	10%/4	2.50%
	N		8
	compute PMT		$1,394.67
	Ans =		$1,394.67
Ans b)	Amortization table
		i	ii=i*2.5%	iii	iv=i+ii-iii
	Period	Beginning balance	Interest	Installment	Closing Balance
	0				10,000
	1	10,000.00	250.00	$1,394.67	$8,855.33
	2	$8,855.33	221.38	$1,394.67	$7,682.04
	3	$7,682.04	192.05	$1,394.67	$6,479.41
	4	$6,479.41	161.99	$1,394.67	$5,246.73
	5	$5,246.73	131.17	$1,394.67	$3,983.22
	6	$3,983.22	99.58	$1,394.67	$2,688.13
	7	$2,688.13	67.20	$1,394.67	$1,360.66
	8	$1,360.66	34.02	$1,394.67	$0.00