Prepare an amortization schedule for a five-year loan of $73,000. The interest r
ID: 2623903 • Letter: P
Question
Prepare an amortization schedule for a five-year loan of $73,000. The interest rate is 9 percent per year, and the loan calls for equal annual payments. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) ALSO...
The interest rate is 9 percent per year, and the loan calls for equal annual payments. How much total interest is paid over the life of the loan? Include how you got the answers!!
The interest rate is 9 percent per year, and the loan calls for equal annual payments. How much total interest is paid over the life of the loan? Include how you got the answers!!
Explanation / Answer
Total interest paid =20,838.74
Calculation
Let payment amount = x
Present value of payamnet = 73000
73000 = x*(1-1/1.09^5)/9%
x= $18,767.75
Each Interest payment = 9%* beginning balance
For example Interest payment for year 1= 9%*73000 = 6,570.00
Principal payment = Total paymnt- interest payment
For year 1, Principal payment =18,767.75- 6,570.00=12,197.75
Ending balance = beginning balance - Principal payment
For year 1, Ending balance = 73000 -12,197.75= $60,802.25
Repeat these for other years, and you have all the values in excel
Year Beginning Total Interest Principal Ending Balance Payment Payment Payment Balance 1 $73,000.00 $18,767.75 $6,570.00 $12,197.75 $60,802.25 2 $60,802.25 $18,767.75 $5,472.20 $13,295.55 $47,506.70 3 $47,506.70 $18,767.75 $4,275.60 $14,492.15 $33,014.55 4 $33,014.55 $18,767.75 $2,971.31 $15,796.44 $17,218.12 5 $17,218.12 $18,767.75 $1,549.63 $17,218.12 $0.00 Total Interest paid $20,838.74