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Carlos borrows $ 15,000 with the agreement that money is worth 5% compounded annually
Carlos borrows $ 15,000 with the agreement that money is worth 5% compounded annually. The debt is to be paid, interest included, by equal installments at the end of each year for 5 years. Find the annual payment and supply the necessary data on the amortization schedule found below.
solve this problem by showing your FORMULA and COMPUTATION done manually, not in excel
| Period | Beginning Amount | Principal | Interest | Payment | Ending Balance |
| 1 | $15,000.00 | ||||
| 2 | |||||
| 3 | |||||
| 4 | |||||
| 5 |
Expert Solution
Answer : Below is the table showing EMI schedule :
EMI = Principal * Rate * {[(1 + r)^number of years] / [(1 + r)^number of years - 1] }
where
rate is the rate per period = 5% or 0.05
Number of years is 5
EMI = 15000 * 0.05 * {[(1 + 0.05)^5] / [(1 + 0.05)^5 - 1] }
= 15000 * 0.05 * {[1.276282 / [1.276282 - 1]}
= 15000 * 0.05 * {1.276282 / 0.276282}
= 3464.62
Below is the table showing EMI schedule :
| Period | Beginning Amount | EMI | Interest Payment (Beginnning balance * 0.05) | Pincipal repayment (EMI - Interest Payment) | Ending balance (Beginning Amount - Pincipal repayment) |
| 1 | 15000.00 | 3464.62 | 750.00 | 2714.62 | 12285.38 |
| 2 | 12285.38 | 3464.62 | 614.27 | 2850.35 | 9435.02 |
| 3 | 9435.02 | 3464.62 | 471.75 | 2992.87 | 6442.15 |
| 4 | 6442.15 | 3464.62 | 322.11 | 3142.51 | 3299.64 |
| 5 | 3299.64 | 3464.62 | 164.98 | 3299.64 | 0.00 |
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