13. Creating an amortization schedule After Shipra got a job, the first thing sh

Question

13. Creating an amortization schedule After Shipra got a job, the first thing she bought was a new car. She took out an amortized loan for $45,000-with no off the loan by making annual payments for the next four years at the end of each year. Her bank is charging her an interest rate of 10% per year, Yesterday, she called to ask that you help her compute the annual payments necessary to repay her loan. Calculate the annual payment and complete t Beginning Interest Paid Principal Paid Payment Ending Balance 1$45,000.00 $0.02

Explanation / Answer

Let us first of all calculate the amount of annual payments using Financial Calculator:

The data feeded are: PV = 45000

N = 4

I/Y (rate) = 4

CPT --> PMT

Annual payment would work out to be $14196.19.

Note: Annual payment can also be computed usin the formula:

Annual payment = [P X R X (1+R)^N] / [(1+R)^N - 1] where P = $45000, R = 10%, N = 4 yrs

Year Begining Amount Payment Interest paid Principal Paid Ending balance 1 45000 14196.19 4500.00 9696.19 35303.81 2 35303.81 14196.19 3530.38 10665.81 24638.00 3 24638 14196.19 2463.8 11732.39 12905.61 4 12905.61 14196.19 1290.56 12905.63 (-) 0.02

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