Colson Company has a line of credit with Federal Bank. Colson can borrow up to $800,000 at any time over the course of the calendar year. The Unit 10 Template shows the prime rate expressed as an annual percentage along with the amounts borrowed and repaid during the year. Colson agreed to pay interest at an annual rate equal to 2 percent above the bank's prime rate. Please note that the interest rate for each month must be converted into a monthly rate by dividing by 12. Funds are borrowed or repaid on the first day of the month. Interest is payable in cash on the last day of the month. The interest rate is applied to the outstanding monthly balance. For example, Colson pays ((4 percent + 2 percent)/12) monthly interest on $80,000 for the month of January.

Construct a chart calculating the loan balance at the end of each month and the interest expense for each month. Be sure the dollar amounts are formatted in dollars.

Use the following Excel template: Unit 10 Template