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    Amortizing Loan

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    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 x

    4-year amortizing loan. Borrow $1,000 initially and repay it in four equal annual year-end payments.

    A) If the interest rate is 8%, show that the annual payment is $301.92
    B) Fill in the table; show how much of each payment is interest verses principal repayment and the outstanding balance on the loan at each date.
    C) Show that the loan balance after 1 year is equal the year-end payment of $301.92 times the 3-year annuity factor.

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    https://brainmass.com/business/finance/amortizing-loan-124337

    Solution Preview

    TIME LOAN BALANCE YEAR-END INTEREST YEAR-END PAYMENT AMORTIZATION OF LOAN
    DUE ON BALANCE

    0 $1,000
    1 $301.92
    2 $301.92
    3 $301.92
    4 $301.92

    4-year amortizing loan. Borrow $1,000 initially and repay it in four equal annual year-end ...

    Solution Summary

    This solution is comprised of a detailed calculation and amortization schedule for loan.

    $2.49

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