Joan Messineo borrowed $15,000 at a 14 percent annual interest rate to be repaid over three years. The loan is amortized into three equal annual end-of-year payments.
a. Calculate the annual end-of-year loan payment.
b. Prepare a loan amortization schedule showing the interest and principal breakdown of each of the three loan payments.
c. Explain why the interest portion of each payment declines with the passage of time.
This solution provides calculations for PMT and a schedule for the the end of year principle for the three year. This solution briefly explains (in one sentence) why the interest portion of each payment declines with the passage of time.