Problem 5-22 Loan amortization Jan sold her house on December 31 and took a $15,
ID: 2416329 • Letter: P
Question
Problem 5-22 Loan amortization Jan sold her house on December 31 and took a $15,000 mortgage as part of the payment. The 10-year mortgage has a 11% nominal interest rate, but it calls for semiannual payments beginning next June 30. Next year Jan must report on Schedule B of her IRS Form 1040 the amount of interest that was included in the two payments she received during the year.
What is the dollar amount of each payment Jan receives?
Round your answer to the nearest cent.
How much interest was included in the first payment?
Round your answer to the nearest cent.
How much repayment of principal was included?
Round your answer to the nearest cent.
How do these values change for the second payment?
The portion of the payment that is applied to interest declines, while the portion of the payment that is applied to principal increases.
The portion of the payment that is applied to interest increases, while the portion of the payment that is applied to principal decreases.
The portion of the payment that is applied to interest and the portion of the payment that is applied to principal remains the same throughout the life of the loan.
The portion of the payment that is applied to interest declines, while the portion of the payment that is applied to principal also declines.
The portion of the payment that is applied to interest increases, while the portion of the payment that is applied to principal also increases.
How much interest must Jan report on Schedule B for the first year?
Round your answer to the nearest cent.
Will her interest income be the same next year? If the payments are constant, why does the amount of interest income change over time?
As the loan is amortized (paid off), the beginning balance, hence the interest charge, increases and the repayment of principal increases
As the loan is amortized (paid off), the beginning balance, hence the interest charge, declines and the repayment of principal increases
As the loan is amortized (paid off), the beginning balance, hence the interest charge, declines and the repayment of principal declines
As the loan is amortized (paid off), the beginning balance, hence the interest charge, increases and the repayment of principal declines
As the loan is amortized (paid off), the beginning balance declines, but the interest charge and the repayment of principal remain the same.
Explanation / Answer
Dollar amount of each payment Jan will receive is $1,204
Interest amount included in the first payment is $750
Repayment of principal amount is shown in below mentioned table.
The portion of the payment that is applied to interest declines, while the portion of the payment that is applied to principal increases.Value change for second period is shown as under:
Interest reported for first year is $1,477
No,interest will not be same next year.
As the loan is amortized (paid off), the beginning balance, hence the interest charge, declines and the repayment of principal increases
Period Beginning balance Payment Interest Payment of principal Ending Balance 1 15,000 1,204 750 454 14,546 2 14,546 1,204 727 476 14,070 3 14,070 1,204 704 500 13,570 4 13,570 1,204 678 525 13,045 5 13,045 1,204 652 551 12,493 6 12,493 1,204 625 579 11,914 7 11,914 1,204 596 608 11,306 8 11,306 1,204 565 638 10,668 9 10,668 1,204 533 670 9,998 10 9,998 1,204 500 704 9,294 11 9,294 1,204 465 739 8,555 12 8,555 1,204 428 776 7,779 13 7,779 1,204 389 815 6,965 14 6,965 1,204 348 855 6,109 15 6,109 1,204 305 898 5,211 16 5,211 1,204 261 943 4,268 17 4,268 1,204 213 990 3,278 18 3,278 1,204 164 1,040 2,238 19 2,238 1,204 112 1,092 1,146 20 1,146 1,204 57 1,146 0Related Questions
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