Set up an amortization schedule for a $45,000 loan to be repaid in equal install

Question

Set up an amortization schedule for a $45,000 loan to be repaid in equal installments at the end of each of the next 5 years. The interest rate is 11%. Round your answers to the nearest cent. Enter "0" if required

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b. How large must each annual payment be if the loan is for $90,000? Assume that the interest rate remains at 11% and that the loan is paid off over 5 years. Round your answer to the nearest cent.

c.

How large must each payment be if the loan is for $90,000, the interest rate is 11%, and the loan is paid off in equal installments at the end of each of the next 10 years? This loan is for the same amount as the loan in part b, but the payments are spread out over twice as many periods. Round your answer to the nearest cent.

d.
Why are these payments not half as large as the payments on the loan in part b?

I. Because the payments are spread out over a longer time period, more principal must be paid on the loan, which raises the amount of each payment.
II. Because the payments are spread out over a longer time period, less interest is paid on the loan, which raises the amount of each payment.
III. Because the payments are spread out over a longer time period, less interest is paid on the loan, which lowers the amount of each payment.
IV. Because the payments are spread out over a shorter time period, more interest is paid on the loan, which lowers the amount of each payment.
V. Because the payments are spread out over a longer time period, more interest must be paid on the loan, which raises the amount of each payment.

Year Payment Repayment Interest Repayment of Principal Balance 1 $   $   $   $   2 $   $   $   $   3 $   $   $   $   4 $   $   $   $   5 $   $   $   $   Total $   $  

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Explanation / Answer

b) Each annual payment will be of $24,351 if the loan is for $90,000.

c)Each annual payment will be of $15,282 if the loan is for $90,000.

d) V. Because the payments are spread out over a longer time period, more interest must be paid on the loan, which raises the amount of each payment.

Ammortization Schedule Year Payment Repayment Interest Repayment of Pricipal Balance 1 12,176 4,950 7,266 37,774 2 12,176 4,155 8,020 29,754 3 12,176 3,273 8,903 20,851 4 12,176 2,294 9,882 10,969 5 12,176 1,207 10,969 0 Total 60,878 15,878 45,000

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