A bank makes a loan of $20, 000 to a customer. Interest is to be charged at an e

Question

A bank makes a loan of $20, 000 to a customer. Interest is to be charged at an effective rate of 8% per annum. The loan is to be repaid by monthly payments in arrear over a term of 10 years. The payments are level for the first 5 years, and then reduced to one-half of their original level for the remaining 5 years.

(a)i. Calculate the monthly repayment rounded up to the nearest cent.

ii. Calculate the interest paid in the first monthly payment.

iii. Calculate the interest paid in the final 12 monthly payments.

(Use algebraic equations to find solutions for each question.)

(b)

i. In Excel, construct the loan schedule for the contract, showing the capital and interest paid in each month, and the outstanding capital each month.

ii. Verify the answers to Question (a) by pointing out the corresponding entries on your spreadsheets.

(c) Use the

Explanation / Answer

please find the above loan amortisation table, it has answers for all your questions

S.No Monthly Installment Interest Principal Balance 1 243 133 109 19891 2 243 133 110 19781 3 243 132 111 19670 4 243 131 112 19558 5 243 130 112 19446 6 243 130 113 19333 7 243 129 114 19219 8 243 128 115 19105 9 243 127 115 18989 10 243 127 116 18873 11 243 126 117 18757 12 243 125 118 18639 13 243 124 118 18521 14 243 123 119 18401 15 243 123 120 18281 16 243 122 121 18161 17 243 121 122 18039 18 243 120 122 17917 19 243 119 123 17793 20 243 119 124 17669 21 243 118 125 17545 22 243 117 126 17419 23 243 116 127 17292 24 243 115 127 17165 25 243 114 128 17037 26 243 114 129 16908 27 243 113 130 16778 28 243 112 131 16647 29 243 111 132 16515 30 243 110 133 16383 31 243 109 133 16249 32 243 108 134 16115 33 243 107 135 15980 34 243 107 136 15844 35 243 106 137 15707 36 243 105 138 15569 37 243 104 139 15430 38 243 103 140 15290 39 243 102 141 15149 40 243 101 142 15008 41 243 100 143 14865 42 243 99 144 14721 43 243 98 145 14577 44 243 97 145 14431 45 243 96 146 14285 46 243 95 147 14138 47 243 94 148 13989 48 243 93 149 13840 49 243 92 150 13689 50 243 91 151 13538 51 243 90 152 13386 52 243 89 153 13232 53 243 88 154 13078 54 243 87 155 12922 55 243 86 157 12766 56 243 85 158 12608 57 243 84 159 12450 58 243 83 160 12290 59 243 82 161 12129 60 243 81 162 11967 61 243 80 163 11805 62 243 79 164 11641 63 243 78 165 11475 64 243 77 166 11309 65 243 75 167 11142 66 243 74 168 10974 67 243 73 169 10804 68 243 72 171 10634 69 243 71 172 10462 70 243 70 173 10289 71 243 69 174 10115 72 243 67 175 9940 73 243 66 176 9763 74 243 65 178 9586 75 243 64 179 9407 76 243 63 180 9227 77 243 62 181 9046 78 243 60 182 8863 79 243 59 184 8680 80 243 58 185 8495 81 243 57 186 8309 82 243 55 187 8122 83 243 54 189 7933 84 243 53 190 7744 85 243 52 191 7553 86 243 50 192 7360 87 243 49 194 7167 88 243 48 195 6972 89 243 46 196 6776 90 243 45 197 6578 91 243 44 199 6379 92 243 43 200 6179 93 243 41 201 5978 94 243 40 203 5775 95 243 38 204 5571 96 243 37 206 5365 97 243 36 207 5158 98 243 34 208 4950 99 243 33 210 4740 100 243 32 211 4529 101 243 30 212 4317 102 243 29 214 4103 103 243 27 215 3888 104 243 26 217 3671 105 243 24 218 3453 106 243 23 220 3233 107 243 22 221 3012 108 243 20 223 2790 109 243 19 224 2565 110 243 17 226 2340 111 243 16 227 2113 112 243 14 229 1884 113 243 13 230 1654 114 243 11 232 1423 115 243 9 233 1189 116 243 8 235 955 117 243 6 236 718 118 243 5 238 481 119 243 3 239 241 120 243 2 241 0

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