. The owner of a business wishes to borrow $100,000 for an expansion of her busi

Question

. The owner of a business wishes to borrow $100,000 for an expansion of her business. She knows she can get at 10 year loan of money from a local bank at 3.25%. She will make annual repayments of the money borrowed at the end of each year. The loan payment has already been determined; complete the remainder of the amortization schedule for the first two years only.

Year

Beginning Amount

Payment

Interest

Repayment of Principal

Balance

1

10179.62

2

10179.62

est Repayment of Principal Balance 1 10179.62 2 10179.62

Year

Beginning Amount

Payment

Interest

Repayment of Principal

Balance

1

10179.62

2

10179.62

Explanation / Answer

1. Beginning amount = 100,000

interest = 3.25% of 100,000 = 3,250

repayment of principal = 10,179.62 - 3,250 = 6,926.62

balance = 100,000 - 6,926.62 = 93,070.38

2. Beginning amount = 93,070.38

interest = 3.5% of 93,070.38 = 3,257.46

repayment of principal = 10,179.62 - 3,257.46 = 6,922.16

balance = 93,070.38 - 6,922.16 = 86,148.22

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