a. Complete an amortization schedule for a $46,000 loan to be repaid in equal installments at the end of each of the next three years. The interest rate is 10% compounded annually. Round all answers to the nearest cent. Year 1 $ 2 $ 3 Year 1: 2: Beginning Balance Year 3: $ % Interest % $ % $ Payment % % Principal % % $ % $ b. What percentage of the payment represents interest and what percentage represents principal for each of the three years? Round all answers to two decimal places. $ Interest $ $ $ Repayment of Principal $ $ $ Ending Balance c. Why do these percentages change over time? I. These percentages change over time because even though the total payment is constant the amount of interest paid each year is declining as the remaining or outstanding balance declines. II. These percentages change over time because even though the total payment is constant the amount of interest paid each year is increasing as the remaining or outstanding balance declines. III. These percentages change over time because even though the total payment is constant the amount of interest paid each year is declining as the remaining or outstanding balance increases. IV. These percentages change over time because even though the total payment is constant the amount of interest paid each year is increasing as the remaining or outstanding balance increases. V. These percentages do not change over time; interest and principal are each a constant percentage of the total payment.
a. Complete an amortization schedule for a $46,000 loan to be repaid in equal installments at the end of each of the next three years. The interest rate is 10% compounded annually. Round all answers to the nearest cent. Year 1 $ 2 $ 3 Year 1: 2: Beginning Balance Year 3: $ % Interest % $ % $ Payment % % Principal % % $ % $ b. What percentage of the payment represents interest and what percentage represents principal for each of the three years? Round all answers to two decimal places. $ Interest $ $ $ Repayment of Principal $ $ $ Ending Balance c. Why do these percentages change over time? I. These percentages change over time because even though the total payment is constant the amount of interest paid each year is declining as the remaining or outstanding balance declines. II. These percentages change over time because even though the total payment is constant the amount of interest paid each year is increasing as the remaining or outstanding balance declines. III. These percentages change over time because even though the total payment is constant the amount of interest paid each year is declining as the remaining or outstanding balance increases. IV. These percentages change over time because even though the total payment is constant the amount of interest paid each year is increasing as the remaining or outstanding balance increases. V. These percentages do not change over time; interest and principal are each a constant percentage of the total payment.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:a. Complete an amortization schedule for a $46,000 loan to be repaid in equal installments at the end of each of the next three years. The
interest rate is 10% compounded annually. Round all answers to the nearest cent.
Year
1
2
3
tA
t
$
Year 1:
Year 2:
Year 3:
|||
Beginning
Balance
$
% Interest
%
%
$
%
$
Payment
% Principal
%
%
पी
%
A
LA
b. What percentage of the payment represents interest and what percentage represents principal for each of the three years? Round all answers
to two decimal places.
Interest
$
$
+A
Repayment
of Principal
$
ta
$
tA
Ending
Balance
11
c. Why do these percentages change over time?
I. These percentages change over time because even though the total payment is constant the amount of interest paid each year is
declining as the remaining or outstanding balance declines.
II. These percentages change over time because even though the total payment is constant the amount of interest paid each year is
increasing as the remaining or outstanding balance declines.
III. These percentages change over time because even though the total payment is constant the amount of interest paid each year is
declining as the remaining or outstanding balance increases.
IV. These percentages change over time because even though the total payment is constant the amount of interest paid each year is
increasing as the remaining or outstanding balance increases.
V. These percentages do not change over time; interest and principal are each a constant percentage of the total payment.
Expert Solution
Step 1
We have to create an amortization schedule for the loan. But for that, we need to know the annual payment.
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