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Problem 5-34 Amortization schedule Set up an amortization schedule for a $45,000 loan to be repaid in equal installments at the end of each of
Problem 5-34 Amortization schedule
- Set up an amortization schedule for a $45,000 loan to be repaid in equal installments at the end of each of the next 3 years. The interest rate is 12% compounded annually. Round all answers to the nearest cent.
Beginning Remaining Year Balance Payment Balance 1 $ $ $ 2 $ $ $ 3 $ $ $ - What percentage of the payment represents interest and what percentage represents principal for each of the 3 years? Round all answers to two decimal places.
% Interest % Principal Year 1: % % Year 2: % % Year 3: % % - Why do these percentages change over time?
- These percentages change over time because even though the total payment is constant the amount of interest paid each year is declining as the balance declines.
- These percentages change over time because even though the total payment is constant the amount of interest paid each year is increasing as the balance declines.
- These percentages change over time because even though the total payment is constant the amount of interest paid each year is declining as the balance increases.
- These percentages change over time because even though the total payment is constant the amount of interest paid each year is increasing as the balance increases.
- These percentages do not change over time; interest and principal are each a constant percentage of the total payment.
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