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In this assignment you ll create an amortization table for a loan with respect to a set of spot rates. Read all of the questions
In this assignment youll create an amortization table for a loan with respect to a set of spot
rates. Read all of the questions before you start designing your spreadsheet to solve them.
Doing so may allow you to create a single spreadsheet that works for all the problems rather
than having to create a new one for each part.
Create a spreadsheet to calculate the original principal amount for a year loan that you
repay with monthly $payments. Interest for the loan is calculated with respect to
spot rates that start at and increase by basis points for each year of duration. More
specifically, if t is measured in years, iS
t for all t iS
t for all t
iS
t for all t etc. Recall that spot rates are measured annually.
For the loan in problem calculate the amount of interest that you pay for each payment,
the amount of principal repaid, and the remaining loan balance, ie make an amortization
table. Be carefulthe final loan balance should be zero!
Look carefully at the column of interest payments. Describe what you see and carefully
explain the behavior.
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