Excel Online Structured Activity: Amortization schedule The data on a loan has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet a. Complete an amortization schedule for a $25,000 loan to be repaid in equal installments at the end of each of the next three years. The interest rate is 11% compounded annually. Round all answers to the nearest cent. Beginning Balance Repayment Year Payment Ending Balance Interest of Principal 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: % % Interest % Principal Year 1: % % Year 2: % % Year 3: % % c. Why do these percentages change over time? 1. 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. BUS G H D B 1 Amortization schedule 2 3 Loan amount to be repaid (PV) 4 Interest rate 5 Length of loan (in years) 6 a Setting up amortization table 8 Calculation of loan payment $25,000.00 1100% 3 Formula ANIA Repayment of Principal Interest Remaining Balance 10 Year Beginning Balance Payment 11 12 2 13 3 14 15 b. Calculating of Payment Representing Interest and Principal for Each Year Payment Payment Representing Representing Year Interest Principal Check Total 100% Undo Clipboard 1 F G H E D 3 Interest ANIA ANIA Repayment of Principal #NIA WNIA #NIA Remaining Balance WNIA WNIA #NIA 17 1 18 2 19 20 21 Formulas 22 Year Beginning Balance Payment 23 1 WNIA #NIA 24 2 #NIA ANIA 25 3 ANIA WNIA 26 27 b. Calculating % of Payment Representing Interest and Principal for Each Year Payment Payment % Representing Representing 28 Year Interest Principal 29 1 WNIA MNIA 30 2 UNA WNIA 31 3 ANIA UNA 32 38 Check Total 100% INTA ANIA ANIA
