Prepare an amortization schedule for a three-year loan of $117,000. The interest
ID: 2764722 • Letter: P
Question
Prepare an amortization schedule for a three-year loan of $117,000. The interest rate is 8 percent per year, and the loan calls for equal annual payments. How much total interest is paid over the life of the loan?
(Enter rounded answers as directed, but do not use rounded numbers in intermediate calculations. 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.)
Year
Beginning
Balance
Total
Payment
Interest
Payment
Principal
Payment
Ending
Balance
1
$
$
$
$
$
2
3
Year
Beginning
Balance
Total
Payment
Interest
Payment
Principal
Payment
Ending
Balance
1
$
$
$
$
$
2
3
Total interest $Explanation / Answer
Answer:
First of all we need to calculate annuity payment of present value of $ 117,000 for 3 years @ 8% interest rate.
Present value of an annuity = Annuity * 1 - (1+interest rate)^-years / interest rate
117,000 = Annuity * 1 - (1+.08)^-3 / .08
Annuity = 117,000 *.08 / 1 - 0.7938
Annuity = 9,360 / 0.2061 = $ 45,399.92
Total interest payment = $ 19,199.76 (Answer)
Year (a) Beginning Balance(last year ending balance) (b) Total payment (as calculated in annuity) (c )Interest payment (a) * 8% (d) Principal Payment (b) - (c ) (e ) Ending Balance (a) -(d) 1 117,000.00 45,399.92 9,360.00 36,039.92 80,960.08 2 80,960.08 45,399.92 6,476.81 38,923.11 42,036.96 3 42,036.96 45,399.92 3,362.96 42,036.96 - Total interest 19,199.76