Question

Prepare an amortization schedule for a three-year loan of $63,000. The interest rate is 10 percent per year, and the loan calls for equal annual payments. How much total interest is paid over the life of the loan?

Answer 1

1. $104.854

2. $274.854

Answer 2

Present value, P=63000interest rate, i = 10% compounded annuallyNumber of periods, n = 3 years
For equal payments,
`A=(P(i*(1+i)^n))/((1+i)^n-1)`
`=(63000(0.10*(1+0.10)^3))/((1+0.10)^3-1)`
=25333.23 per annual payment to the nearest cent