Loan amortization schedule - Personal Finance Problem: Joan Messineo borrowed $44,000 at a 5% annual rate of interest to be repaid over 3 years. The loan is amortized into three equal, annual, end-of-year payments.

a. Calculate the annual, end-of-year loan payment.

b. Prepare a loan amortization schedule showing the interest and principal breakdown of each of the three loan payments.

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

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a.The amount of the equal, annual, end-of-year loan payment is? $ enter your response here. (Round to the nearest cent.)

b.Prepare a loan amortization schedule showing the interest and principal breakdown of each of the three loan payments. Many financial calculators have an amortization function which makes this process easy. Once the payment is determined in step a above, you can use the AMORT function to calculate the interest paid, principal paid and ending loan balance for each payment period. You should consult your calculator instructions for specific details pertaining to your calculator.

Part 3

What is the account balance at the beginning of year 1?(Round to the nearest cent.)

Year	Beginning- of-year principal	Loan payment	Payments	End-of-year principal
Interest	Principal
1	$ enter your response here

Part 4

What is the amount of the loan payment at the end of year 1?(Round to the nearest cent.)

Year	Beginning- of-year principal	Loan payment	Payments	End-of-year principal
Interest	Principal
1	$44,000	$ enter your response here

Part 5

What portion of the payment is applied to interest in year 1?(Round to the nearest cent.)

Year	Beginning- of-year principal	Loan payment	Payments	End-of-year principal
Interest	Principal
1	$44,000	$16,157.18	$ enter your response here

Part 6

What portion of the payment is applied to the principal in year 1?(Round to the nearest cent.)

Year	Beginning- of-year principal	Loan payment	Payments	End-of-year principal
Interest	Principal
1	$44,000	$16,157.18	$2,200.00	$ enter your response here

Part 7

What is the principal balance at the end of year 1?(Round to the nearest cent.)

Year	Beginning- of-year principal	Loan payment	Payments	End-of-year principal
Interest	Principal
1	$44,000	$16,157.18	$2,200.00	$13,957.18	$ enter your response here

Part 8

What is the account balance at the beginning of year 2?(Round to the nearest cent.)

Year	Beginning- of-year principal	Loan payment	Payments	End-of-year principal
Interest	Principal
1	$44,000	$16,157.18	$2,200.00	$13,957.18	$30,042.82
2	$ enter your response here

Part 9

What is the amount of the loan payment at the end of year 2?(Round to the nearest cent.)

Year	Beginning- of-year principal	Loan payment	Payments	End-of-year principal
Interest	Principal
1	$44,000	$16,157.18	$2,200.00	$13,957.18	$30,042.82
2	$30,042.82	$ enter your response here

Part 10

What portion of the payment is applied to interest in year 2?(Round to the nearest cent.)

Year	Beginning- of-year principal	Loan payment	Payments	End-of-year principal
Interest	Principal
1	$44,000	$16,157.18	$2,200.00	$13,957.18	$30,042.82
2	$30,042.82	$16,157.18	$ enter your response here

Part 11

What portion of the payment is applied to the principal in year 2?(Round to the nearest cent.)

Year	Beginning- of-year principal	Loan payment	Payments	End-of-year principal
Interest	Principal
1	$44,000	$16,157.18	$2,200.00	$13,957.18	$30,042.82
2	$30,042.82	$16,157.18	$1,502.14	$ enter your response here

Part 12

What is the principal balance at the end of year 2?(Round to the nearest cent.)

Year	Beginning- of-year principal	Loan payment	Payments	End-of-year principal
Interest	Principal
1	$44,000	$16,157.18	$2,200.00	$13,957.18	$30,042.82
2	$30,042.82	$16,157.18	$1,502.14	$14,655.04	$ enter your response here

Part 13

What is the account balance at the beginning of year 3?(Round to the nearest cent.)

Year	Beginning- of-year principal	Loan payment	Payments	End-of-year principal
Interest	Principal
1	$44,000	$16,157.18	$2,200.00	$13,957.18	$30,042.82
2	$30,042.82	$16,157.18	$1,502.14	$14,655.04	$15,387.78
3	$ enter your response here

Part 14

What is the amount of the loan payment at the end of year 3? (Round to the nearest cent.)

Year	Beginning- of-year principal	Loan payment	Payments	End-of-year principal
Interest	Principal
1	$44,000	$16,157.18	$2,200.00	$13,957.18	$30,042.82
2	$30,042.82	$16,157.18	$1,502.14	$14,655.04	$15,387.78
3	$15,387.78	$ enter your response here

Part 15

What portion of the payment is applied to interest in year 3?(Round to the nearest cent.)

Year	Beginning- of-year principal	Loan payment	Payments	End-of-year principal
Interest	Principal
1	$44,000	$16,157.18	$2,200.00	$13,957.18	$30,042.82
2	$30,042.82	$16,157.18	$1,502.14	$14,655.04	$15,387.78
3	$15,387.78	$16,157.18	$ enter your response here

Part 16

What portion of the payment is applied to the principal in year 3?(Round to the nearest cent.)

Year	Beginning- of-year principal	Loan payment	Payments	End-of-year principal
Interest	Principal
1	$44,000	$16,157.18	$2,200.00	$13,957.18	$30,042.82
2	$30,042.82	$16,157.18	$1,502.14	$14,655.04	$15,387.78
3	$15,387.78	$16,157.18	$769.39	$ enter response here

Part 17

What is the principal balance at the end of year 3?(Round to the nearest cent.)

Year	Beginning- of-year principal	Loan payment	Payments	End-of-year principal
Interest	Principal
1	$44,000	$16,157.18	$2,200.00	$13,957.18	$30,042.82
2	$30,042.82	$16,157.18	$1,502.14	$14,655.04	$15,387.78
3	$15,387.78	$16,157.18	$769.39	$15,387.79	$ enter response here

Part 18

c. Explain why the interest portion of each payment declines with the passage of time.(Select the best answer below.)

A. Through annual end-of-the-year payments, the principal balance of the loan is declining, causing more interest to be accrued on the balance.

B. Through annual end-of-the-year payments, the interest balance of the loan is declining, causing less principal to be accrued on the balance.

C. Through annual end-of-the-year payments, the principal balance of the loan is declining, causing less interest to be accrued on the balance.

D. Through annual end-of-the-year payments, the principal balance of the loan is increasing, causing less interest to be accrued on the balance.