Problem 1------

Loan Amortization Table

You plan to take out a $20,000 term loan from your bank. It will be repaid over a 4-year period an charges an a rate of interest of 8%.

Assume that you have to make 4 equal annual payments.

Create a loan amortization table that show the Payment each year, the Interest portion each payment, the Principal portion of each payment and the Balance of the loan at the end of each year.

Problem 2 ------ Effective Rate of Interest
Using the data from Problem 1, assume that the bank will also charge you a loan origination fee of 5% of the original loan amount.
What is the effective rate of interest on the loan?