Pool-N-Patio World needs to borrow $70,000 to increase its inventory for the upcoming summer season. The owner is confident that he will sell most, if not all, of the new inventory during the summer, so he wishes to borrow the money for only four months. His bank has offered him a simple interest amortized loan at 7 3/4 % interest. (Round your answers to the nearest cent.) (a) Find the size of the monthly bank payment. $ (b) Prepare an amortization schedule for all four months of the loan. Payment Number Principal Portion Interest Portion Total Payment Balance Due 0 $ 1 $ $ $ $ 2 $ $ $ $ 3 $ $ $ $ 4 $ $ $ $
Pool-N-Patio World needs to borrow $70,000 to increase its inventory for the upcoming summer season. The owner is confident that he will sell most, if not all, of the new inventory during the summer, so he wishes to borrow the money for only four months. His bank has offered him a simple interest amortized loan at
$
(b) Prepare an amortization schedule for all four months of the loan.
| Payment Number |
Principal Portion |
Interest Portion |
Total Payment |
Balance Due |
|---|---|---|---|---|
| 0 | $ | |||
| 1 | $ | $ | $ | $ |
| 2 | $ | $ | $ | $ |
| 3 | $ | $ | $ | $ |
| 4 | $ | $ | $ | $ |
Amortization of a loan refers to the process of paying off a debt over time, usually through a series of regular payments that include both principal and interest. The goal of amortization is to gradually reduce the outstanding balance of the loan until it is completely paid off.
In an amortized loan, each payment is composed of two parts: principal and interest. The principal is the portion of the payment that goes toward paying down the original amount borrowed, while the interest is the cost of borrowing the money.
Here,
Principal “P” = $70,000
Annual rate = 7 ¾ % = 7.75%
Monthly rate “r”= 7.75%/12 = 0.645833333333333%
Number of months “n” = 4
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