Question

Please show formulas and work. No excel formulas please.

Problem 1 You take out an amortized loan for $10,000. The loan is to be paid in equal installments at the end of each of the next 5 years. The interest rate is 8%. Construct an amortization schedule. Problem 2: A. Calculate the PV of $100 due in 5 years compounded daily at 12%. B. Calculate the FV of $1000 due in 3 years at 6% compounded quarterly. C. Calculate the FVA of $300 due at the end of each of the next 5 years at 496. D. Calculate the PVA of $300 due at the end of each of the next 5 years at 4%. Problem 3: Compute the EAR of 10% compounded daily. Previous Next search 0

Answer 1

1)	Amortization Schedule for 5 Years:
	Year	Beginning Loan balance			Interest Expense		Annual Payment		Reduction in Loan balance			Ending Loan Balance
			a		b=a*8%		c		d=c-b			e=a-d
	1		$ 10,000.00		$     800.00		$   2,504.56		$ 1,704.56			$ 8,295.44
	2		$   8,295.44		$     663.63		$   2,504.56		$ 1,840.93			$ 6,454.51
	3		$   6,454.51		$     516.36		$   2,504.56		$ 1,988.20			$ 4,466.30
	4		$   4,466.30		$     357.30		$   2,504.56		$ 2,147.26			$ 2,319.04
	5		$   2,319.04		$     185.52		$   2,504.56		$ 2,319.04			$         0.00
	Total				$ 2,522.82		$ 12,522.82
	Working:
	# 1	Present value of annuity of 1			=	(1-(1+i)^-n)/i			where,
					=	(1-(1+0.08)^-5)/0.08			i	8%
					=	3.99271004			n	5
	# 2	Annual Payment			=	Loan Amount/Present value of annuity of 1
					=	$       10,000	/	3.99271
					=	$   2,504.56