Question
On January 1, 2019 Calcium Inc. has the following two alternatives in regards to financing: Loan A $220,000, 3.5% for 5 years. Fixed Principal Payments
On January 1, 2019 Calcium Inc. has the following two alternatives in regards to financing: Loan A $220,000, 3.5% for 5 years. Fixed Principal Payments of $22,000 due semiannually on June 30 and December 31. Loan B $220,000, 3.5% for 5 years. Blended Principal Payments of $24,173 due semiannually on June 30 and December 31. Instructions (a) Prepare an instalment schedule for each alternative for June 30, and Dec 31. (b) Which alternative will reduce the principal on the loan quicker in year 1? (c) Which alternative will report the most interest expense on the income statement in year 1?
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