j. Suppose you bought a house and took out a mortgage for $50,000. The interest rate is 8%, and you must amortize the loan over 10 years with equal end-of-year payments. Set up an amortization schedule that shows the annual payments and the amount of each payment that repays the principal and the amount that constitutes interest expense to the borrower and interest income to the lender.

Original amount of mortgage: 50000

Term of mortgage: 10

Interest rate: 0.08

Annual payment (use PMT function):

Year Beg. Amt. Pmt Interest Principal End. Bal.

1

2

3

4

5

6

7

8

9

10

(2) Suppose the loan called for 10 years of monthly payments, 120 payments in all, with the same original amount and the same nominal interest rate. What would the amortization schedule show now?

Now we would have a 12 10 = 120-payment loan at a monthly rate of .08/12 = 0.666667%.

The monthly payment would be:_______________________

Month Beg. Amt. Pmt Interest Principal End. Bal.

1

2

3

4

5

6

7

8

9

10

11

...