Question

MODEL 6:LOAN AMOTIZATION TABLE FOR CHANGING INTEREST RATE The Problem Create a model to produce an amortization table for a variable rate loan for which the interest rate can change in two steps over its life, that is, the loan life is broken down into three interest rate periods with different interest rates specified for the three periods. The loan is to be repaid in equal annual instalments over its life and the first payment is to be made at the end of the first year. The user will provide the lengths of the three interest rate periods (in years) and the interest rates for each of them. The model will have to calculate the appropriate equal annual payment.

Answer 1

A loan of $ 100000

to be repaid annually over 36 years

with varying interest rates of

5% in Years 1 --12

6% in Years 12--24    &

4% in Years   24--36

We calculate the principal balance at the end of 12 yrs. & find out the annuity amt. for the next 24 years--given the next varying rate of interest, ie. 6% p.a.

Again, at end of the 24th year, with the principal balance,we find the annuity amt. for the balance 12 years calculated at the varying interest rate of 4% p.a.

Loan Amortisation Table
No.of annual payment	PMT.	Tow. Int.	Tow. Princ.	Prin. Bal.
0				100000
1	5300	5000	300	99700
2	5300	4985	315	99385
3	5300	4969	331	99054
4	5300	4953	347	98707
5	5300	4935	365	98342
6	5300	4917	383	97959
7	5300	4898	402	97557
8	5300	4878	422	97135
9	5300	4857	443	96692
10	5300	4835	465	96227
11	5300	4811	489	95738
12	5300	4787	513	95225
13	6250	5713	537	94688
14	6250	5681	569	94120
15	6250	5647	603	93517
16	6250	5611	639	92878
17	6250	5573	677	92201
18	6250	5532	718	91483
19	6250	5489	761	90721
20	6250	5443	807	89915
21	6250	5395	855	89060
22	6250	5344	906	88153
23	6250	5289	961	87192
24	6250	5232	1018	86174
25	9185	3447	5738	80436
26	9185	3217	5968	74468
27	9185	2979	6206	68262
28	9185	2730	6455	61808
29	9185	2472	6713	55095
30	9185	2204	6981	48114
31	9185	1925	7260	40853
32	9185	1634	7551	33302
33	9185	1332	7853	25449
34	9185	1018	8167	17282
35	9185	691	8494	8789
36	9185	352	8833	-45
	248820	148775	100045
				(Rounding-off error)