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CHAPTER 5 Time Value of Money243 Personal Finance Problem Loan amortization schedule Joan Messineo borrowed $15,000 at a 14% annual rate of interest to be repaid over 3 years. The loan is amortized into three equal, an- nual, end-of-year payments. a. Calculate the annual, end-of-year loan payment. b. Prepare a loan amortization schedule showing the interest and principal break- P5-48 down of each of the three loan payments. plain why the interest portion of each payment declines with the passage of P5-49 Loan intere st deductions Liz Rogers just closed a $10,000 business loan that is to be repaid in three equal, annual, end-of-year payments. The interest rate on the loa 13 %. As part of her firm's detailed financial planning, Liz wishes to determine the annual interest deduction attributable to the loan. (Because it is a business loan, the interest portion of each loan payment is tax-deductible to the business.) a. Determine the firm's annual loan payment. b. Prepare an amortization schedule for the loan. c. How much interest expense will Liz's firm have in each of the next 3 years as a result of this loan? Personal Finance Problem Loan rates of Interest You want to buy a new car that costs $48,000. Dealer A offers to lend you the entire $48,000 for a zero-interest 2-year loan with monthly payments that start the next month. Dealer B requires you to pay $10,000 now, followed by installments of $1,500 for the next 24 months. You observe that the market interest rate is 6%. a. What is the net cost today of the two options? Which option offers you the P5-50 cheapest financing? b. Use a financial calculator or spreadsheet to help you calculate what the interest rate would be if the financing cost from Dealer A was equal to that of Dealer B. he following table