The data on a loan has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. x Open spreadsheet a. Complete an amortization schedule for a $35,000 loan to be repaid in equal installments at the end of each of the next three years. The interest rate is 12% compounded annually. Round all answers to the nearest cent. Beginning Balance Year Repayment of Principal Payment Ending Balance Interest 1 $ $ $ $ $ 2 $ $ $ $ 3 $ $ $ $ $ b. What percentage of the payment represents interest and what percentage represents principal for each of the three years? Round all answers to two decimal places Yo Interest Year 1: % Principal % % Year 2: % % Year 3: % % 3 $ $ $ b. What percentage of the payment represents interest and what percentage represents principal for each of the three years? Round all answers to two decimal places. % Interest % Principal Year 1: % % Year 2: % % Year 3: % c. Why do these percentages change over time? I. These percentages change over time because even though the total payment is constant the amount of interest paid each year is declining as the remaining or outstanding balance declines II. These percentages change over time because even though the total payment is constant the amount of interest paid each year is increasing as the remaining or outstanding balance declines III. These percentages change over time because even though the total payment is constant the amount of interest paid each year in declining as the remaining or outstanding balance increases. IV. These percentages change over time because even though the total payment is constant the amount of interest paid each year is increasing as the remaining or outstanding balance increases V. These percentages do not change over time; interest and principal are each a constant percentage of the total payment D E G H 1 3 Loan amount to be repaid (PV) 4 Interest rate (1) 5 Length of loan (in years) 6 7 a. Setting up amortization tablo 8 Calculation of loan payment 9 $35,000.00 12.00% 3 Forma WNIA Interest Repayment of Principal Remaining Balance 10 Year Beginning Balance 11 Payment 1 12 2 13 3 14 15 b. Calculating % of Payment Representing Interest and Principal for Each Year Payment % Payment Representing Representing 16 Year Interest Principal 17 1 18 2 19 3 20 21 Formulas Check Total 100% 22 23 Year 1 Beginning Balance WNA Payment #N/A Interest #NA Repayment of Principal WNA Remaining Balance NA Sheet1 + Payment % Representing Interest Payment % Representing Principal Check: Total = 100% Year 1 2 3 Formulas Interest #N/A #N/A #N/A Repayment of Principal #N/A #NA #N/A Remaining Balance #N/A #N/A #N/A Year Beginning Balance Payment 3 1 #N/A #N/A 4 2 #NA #N/A 5 3 #N/A #N/A 26 e7 b. Calculating % of Payment Representing Interest and Principal for Each Year Payment % Payment % Representing Representing 28 Year Interest Principal 29 1 #N/A #N/A 30 2 #N/A #N/A 31 3 #N/A #N/A 32 33 34 35 36 Check: Total 100% #NIA #N/A #N/A
