Brian borrows $35,000 from a bank at 5 percent annually compounded interest to be repaid in 5 years.

a. Calculate the principal paid in the third year.

b. Calculate theannual loan payment.

c. Make a loan amortization schedule showing the interest and principal breakdown.

Amortization Schedule

End-of-year

Beginning-of-year principle

Loan Payment

Loan Payment

End-of-year balance

Interest

Paid

Principal

Paid

1

35,000

2

3

d. Explain why the interest portion of each payment declines with the passage of time.

Question 35 options: