Homework: Assignment 3 Save Score: 0 of 10 pts 46 of 10 (6 complete) Hw Score: 4

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Homework: Assignment 3 Save Score: 0 of 10 pts 46 of 10 (6 complete) Hw Score: 46.67%, 46.67 of 100 pts P5-48 (similar to Question Help * Loan amortization schedule Personal Finance Problem Joan Messineo borrowed $19,000 at a 13% annual rate of interest to be repaid over 3 years. The loan is amortized into three equal annual, end-of-year payments a. Calculate the annual, end-of year loan paymet b. Prepare a loan amortization schedule showing the interest and principal breadown of each of the three loan payments c. Explain why the interest portion of each payment declines with the passage of tme The amount of the equal, annual, end-of year loan payment is s Round to the nearest cent) Enter your answer in the answer box and then click Check Answer parts Clear All

Explanation / Answer

a. Payment = $8,046.92

Using financial calculator BA II Plus - Input details:

#

I/Y = Rate/Frequency =

13.000000

FV = Future value =

$0

N = Total payment term x Frequency =

                            3

PV = Present value of Loan =

-$19,000.00

CPT > PMT = Payment =

$8,046.92

Alternate formula-based method:

PMT = Payment = |PV| x R% x (1+R%)^N / ((1+R%)^N - 1)

$8,046.92

b.

Amortization schedule:

Year

Beginning Balance

Payment

Interest

Repayment of principal

Ending balance

Y

OP

PMT

I = OP x Rate

AM = PMT - I

CB

1

$19,000.00

$8,046.92

2,470.00

$5,576.92

$13,423.08

2

13,423.08

$8,046.92

1,745.00

$6,301.92

7,121.17

3

7,121.17

$8,046.92

925.75

$7,121.17

-

c.

Interest is paid on Ending balance or Unpaid balance of the loan hence, when we make each payment there is some interest and principal components, principal component paid reduces the unpaid balance. As principal component reduces unpaid balance we are ought to pay lower interest with passage of time.

Using financial calculator BA II Plus - Input details:

#

I/Y = Rate/Frequency =

13.000000

FV = Future value =

$0

N = Total payment term x Frequency =

                            3

PV = Present value of Loan =

-$19,000.00

CPT > PMT = Payment =

$8,046.92

Alternate formula-based method:

PMT = Payment = |PV| x R% x (1+R%)^N / ((1+R%)^N - 1)

$8,046.92

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