Problem 6-55 Amortization with Equal Payments [LO3] Prepare an amortization sche
ID: 2384312 • Letter: P
Question
Problem 6-55 Amortization with Equal Payments [LO3]
Prepare an amortization schedule for a five-year loan of $54,000. The interest rate is 9 percent per year, and the loan calls for equal annual payments. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Leave no cells blank - be certain to enter "0" wherever required.)
How much interest is paid in the third year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
How much total interest is paid over the life of the loan? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
References
eBook & Resources
Prepare an amortization schedule for a five-year loan of $54,000. The interest rate is 9 percent per year, and the loan calls for equal annual payments. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Leave no cells blank - be certain to enter "0" wherever required.)
Explanation / Answer
Answer:
The present value of loan
= Equal Annual payment[{(1+interest rate)no of periods - 1}/{Interest rate*(1+interest rate)no of periods}]
=>54,000 = Equal annual payment [{(1+0.09)5-1}/{0.09(1+0.09)5}
=> 54,000 =Equal annual payment*(0.538624/10.138476)
=>Equal annual paymens = $54,000/3.88965 = $13,882.99
2) Interest paid in 3rd year = $3,162.78
3) Total interest paid over life of the loan = $15,414.97
year BeginningBalance Total
Payment Interest
Payment Principal
Payment Ending
Balance 1 54000 13882.99 4860 9022.99 44977.01 2 44977.01 13882.99 4047.93 9835.06 35141.95 3 35141.95 13882.99 3162.78 10720.21 24421.74 4 24421.74 13882.99 2197.96 11685.03 12736.70 5 12736.70 13882.99 1146.30 12736.69 0.02 Total 69414.95 15414.97 53999.98