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Homework answers / question archive / Complete an amortization schedule for a $39,000 loan to be repaid in equal installments at the end of each of the next 3 years
Complete an amortization schedule for a $39,000 loan to be repaid in equal installments at the end of each of the next 3 years. The interest rate is 9% compounded annually. If an amount is zero, enter"0". Do not round Intermediate calculations. Round your answers to the nearest cent. Beginning Balance Repayment of Principal Year 1 Payment $ Remaining Balance Interest $ 2 3 b. What percentage of the payment represents interest and what percentage represents principal for each of the 3 years? Do not round Intermediate calculations. Round your answers to two decimal places. % Interest % Principal Year 1: % % Year 2: % Year 3: % % Why do these percentages change over time? 1. These percentages change over time because even though the total payment is constant the amount of interest paid each year is declining as the remaining or outstanding balance declines. 11. These percentages change over time because even though the total payment is constant the amount of interest paid each year is increasing as the remaining or outstanding balance declines. declining as the remaining or outstanding balance increases. III. These percentages change over time because even though the total payment is constant the amount of interest paid each year is increasing as the remaining or outstanding balance increases. IV. These percentages change over time because even though the total payment is constant the amount of interest paid each year is V. These percentages do not change over time; interest and principal are each a constant percentage of the total payment. ? Select.
Equal Annual Installments = Loan Amount / PVAF = $39,000 / 2.531295 = $15,407.14
Present Value Annutiy Factor is the sum of Present Values Factors at 9% for 3 years in this case.
a) Amortisation Schedule
| Year | Beginning Balance | Payment | Interest (Op bal * 9%) |
Repayment of Principal | Remaining Balance |
| 1 | $39,000 | $15,407.14 | $3,510 | $11,897.14 | $27,102.86 |
| 2 | $27,102.86 | $15,407.14 | $2,439.26 | $12,967.88 | $14,134.99 |
| 3 | $14,134.99 | $15,407.14 | $1,272.15 | $14,134.99 | 0 |
b) % of Payment
| Year | % Interest | % Principal |
| 1 | 22.78% | 77.22% |
| 2 | 15.83% | 84.17% |
| 3 | 8.26% | 91.74% |
Ans c) Option I : These payments change over time because even though the total payment is constant the amount of interest paid each year is declining as the remaining or outstanding balnce declines.
