a. Complete an amortization schedule for a $18,000 loan to be repaid in equal installments at the end of each of the next three years. The interest rate is 6% compounded annually. Round all answers to the nearest cent. Beginning Balance Repayment of Principal Ending Balance Payment Interest Year 1 2 3 $ $ $ 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 % Principal Year 1: Year 2: Year 3: 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. 1 Amortization schedule Loan amount to be repaid (PV) Interest rate (0) Length of loan in years) $18,000.00 6.00% 4 5 7 8 a. Setting up amortization table Calculation of loan payment Formula #N/A Year Beginning Balance Repayment of Principal Payment Interest Remaining Balance 15 b. Calculating % of Payment Representing Interest and Principal for Each Year Payment % Representing Principal Payment % Representing Interest Year Check: Total = 100% o coa 2 3 21 Formulas Repayment of - -- Formulas Year Beginning Balance #N/A #N/A #N/A Payment #N/A #N/A #N/A Interest #N/A #N/A #N/A Repayment of Principal #N/A #N/A #N/A Remaining Balance #N/A #N/A #N/A b. Calculating % of Payment Representing Interest and Principal for Each Year Payment % Payment % Representing Year Representing Interest Principal Check: Total = 100% #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A