Question

Please solve, show work, and give detail explanation

Exam #1 Review Problems Chapters 1, 2, 3, 4, 5, and 8 11. Prepare an amortization schedule for a three-year loan of $53,000. The interest rate is 7 percent per year, and the loan calls for equal annual payments. How much interest is paid in the third year?

Answer 1

Annual Interest Rate	7.00%
Years	3
Payments Per Year	1
Amount	$53,000
			Equal Annual Pmt		Interest pmt	Part of principal repaid	Remaining principal
	Year
	1	=(53000*0.07)*((1+0.07)^3)/((1+0.07)^3-1)	20195.74	=53000.00*7%	$3,710.00	$16,485.74	$36,514.26
	2	=(36514.26*0.07)*((1+0.07)^2)/((1+0.07)^2-1)	20195.74	=36514.26*7%	$2,556.00	$17,639.74	$18,874.52
	3	=(18874.52*0.07)*((1+0.07)^1)/((1+0.07)^1-1)	20195.74	=18874.52*7%	$1,321.22	$18,874.52	$0.00
		$1,321.22 would be interest paid in year 3.
		Formulae
		(P X R) X [(1+R) ^N] / [(1+R) ^N-1] = Equal annual pmt
		Total annual pmt - interest amount = principal pmt repaid
		Beginning of year principal - annual principal pmt repaid = balance principal at end of year
		P - Principal amount
		R - Rate of interest
		N - Number of years