Explore BrainMass

Explore BrainMass

    Amortizing Loan

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    38. Amortizing Loan. Consider a 4-year amortizing loan. You borrow $1,000 initially, and repay it in four equal annual year-
    end payments.

    a. If the interest rate is 8 percent, show that the annual payment is $301.92.

    b. Fill in the following table, which shows how much of each payment is interest versus principal repayment (that is,
    amortization), and the outstanding balance on the loan at each date.

    Time Loan Balance Year-end Interest Year-end Payment Amortization of Loan
    Due on Balance
    0 $1,000 $80 $301.92 $221.92
    1 _______ _________ $301.92 _____
    2 _______ _________ $301.92 _____
    3 _______ _________ $301.92 _____
    4 0 0 __ ___

    c. Show that the loan balance after 1 year is equal to the year-end payment of $301.92 times the 3-year annuity factor.

    © BrainMass Inc. brainmass.com March 4, 2021, 8:22 pm ad1c9bdddf


    Solution Summary

    This posting gives a detailed solution to the problem posted by the student.