Does anyone know the answer to this question The loan is paid with equal payment

Question

Does anyone know the answer to this question

The loan is paid with equal payments during 100 periods (each payment is made in the end of the corresponding period), and the interest rate per period is 0.04. For the payment made in period 69, what part of it is made towards principal payment. (Your answer should be a number between 0 and 1, with 0.001 precision: the total payment -- 1 -- is divided to a payment towards interest accrued on the remaining principal during this period, say lambdainleft[0,1 ight][0,1], and a principal payment, 1-lambda1).

Explanation / Answer

Your answer can be calculated with spread sheet , lets take the following example:

Loan amount is $1,000,000 (p) and Interest rate interest rate of 0.04 (i) as given
Tenure of loan is 100 months(=n)

Use formula in excel/spreadsheet:

EMI=pmt(0.04,100,-1,000,000)=40,808

Now for principal at 69th month
Principal = ppmt(0.04,69,100,-1000000) =11,632.644

Interest amount will be EMI-Principal =

£29,175.356

Hope this will help.

£29,175.356

Hope this will help.

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