A loan of $4,479 at 14.25% interest compounded semi-annually is to be repaid in

Question

A loan of $4,479 at 14.25% interest compounded semi-annually is to be repaid in four years in equal semi-annual payments. Complete an amortization schedule for the loan. Adjust the final payment so the balance is zero.

Fill out the amortization schedule below.

(Round to the nearest cent as needed. Do not include the $ symbol in your answers.)

Payment Number Amount of Payment Interest Payment Applied to Principal Balance $4,479 1 $ $ $ $ 2 $ $ $ $ 3 $ $ $ $ 4 $ $ $ $ 5 $ $ $ $ 6 $ $ $ $ 7 $ $ $ $ 8 $ $ $ $

Explanation / Answer

Periodic payment of a loan is given by

P = L[r(1 + r)^n]/[(1 + r)^n - 1]

P - Periodic payment = ?

r - Interst rate = 0.1425/2 = 0.07125

n - Term = 4*2 = 8

L - Loan amount = 4479

P = 4479(0.07125(1 + 0.07125)^8)/((1 + 0.07125)^8 - 1) = 753.73

Semi annual payment = $753.73

Amortization tables as below:

Payment Number Amount of payment Interest Payment = Balance *0.07125 Applied to principal = Total payment - Amount to interest Ending Balance = Previous balance - amount to principal 4479 1 753.73 319.13 434.60 4044.40 2 753.73 288.16 465.56 3578.84 3 753.73 254.99 498.73 3080.11 4 753.73 219.46 534.27 2545.84 5 753.73 181.39 572.33 1973.51 6 753.73 140.61 613.11 1360.39 7 753.73 96.93 656.80 703.59 8 753.73 50.13 703.59 0.00

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