Question

Problem 5-34
Amortization schedule

1. Set up an amortization schedule for a $42,000 loan to be repaid in equal installments at the end of each of the next 3 years. The interest rate is 6% compounded annually. Round all answers to the nearest cent.

   	Beginning		Remaining
   Year	Balance	Payment	Balance
   1	$	$	$
   2	$	$	$
   3	$	$	$

2. What percentage of the payment represents interest and what percentage represents principal for each of the 3 years? Round all answers to two decimal places.

   	% Interest	% Principal
   Year 1:	%	%
   Year 2:	%	%
   Year 3:	%	%

Answer 1

a)

A 1 Year Beg amount Payment Int. Pricipal paid Remaining balance 2 1 $ 42,000.00 $15,712.61 $2,520.00 $13,192.61 $ 28,807.39 3 2 $28,807.39 $15,712.61 $1,728.44 $ 13,984.17 $ 14,823.22 3 $ 14,823.22 $15.712.61 $ 889.39 $ 14,823.22 $ 4 A DE 1 Year Beg amount Payment Int. Pricipal paid Remaining balance 21 42000 =PMT(6%,3,-42000) | =B2*6% =C2-D2 =B2-E2 32 =B2-E2 =PMT(6%,3,-42000) =B3*6% =C3-D3 =B3-E3 4 3 =B3-E3 =PMT(6%,3,-42000) =B4*6% =C4-D4 =B4-E4

b)

A C D E G 1 Year Payment Int. Pricipal paid % int. 2 1 $15,712.61 $2,520.00 $13,192.61 16.04% 3 2 $15,712.61 | $1,728.44 | $ 13,984.17 11.00% 4 3 $15,712.61 $ 889.39 $ 14.823.22 5.66% H % principal 83.96% 89.00% 94.34%| A E GH. 1 Year Payment Int. Pricipal paid % int. % principal 2 1 =PMT(6%,3,-42000) =B2*6% =C2-D2 =D2/C2 =E2/C2 3 2 =PMT(6%,3,-42000) =B3*6% =C3-D3 =D3/C3 =E3/C3 4 3 =PMT(6%,3,-42000) =B4*6% =C4-D4 =D4/C4 =E4/04