Ch. 5 value 10.00 points Problem 5-55 Amortization with Equal Payments [LO 3 Pre
ID: 2749078 • Letter: C
Question
Ch. 5 value 10.00 points Problem 5-55 Amortization with Equal Payments [LO 3 Prepare an amortization schedule for a three year loan of $108,000. 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? Round your answers to 2 decimal places (e.g., 32.16). Leave no cells blank: You must enter '0' for the answer to grade correctly.) Beginning Total Ending Payment Total interest ezto.mheducation.com/hm.tpx?--0.08533569977305788-14491 61962458 Read (UExplanation / Answer
Interest for first year = Opening balance for first year x Rate of Interest
= $108,000 x 9%
= $9,720
Interest for second year = Opening balance for second year x Rate of Interest
= ($108,000 - $36,000 + $9,720) x 9%
= $81,720 x 9%
= $7,354.80
Interest for third year = Opening balance for third year x Rate of Interest
= ($81,720 - $36,000 + $7,354.80) x 9%
= $53,074.80 x 9%
= $4,776.73
Total interest of loan period = Interest for first year + Interest for second year + Interest for third year
= $9,720 + $7,354.80 + $4,776.73
= $21,851.53
Hence, total interest of loan is $21,851.53