You are looking at buying a quarter (160 acres) of farmland in SE South Dakota at $8,000 per acre. Your loan officer said they would be able to finance 50% of the total purchase price @ 3.5% interest per year for 20 years with one annual payment each year. You have two options for loan, an equal payments amortized loan or an equal principal payments amortized loan.

Part 1

Used the information above to complete the AGEC 271 Chapter 19 - Loan Structure Assignment spreadsheet. For the equal payment amortized, use the PMT, IPMT, and PPMT functions in Excel or the formula below to calculate the total payment, then calculate interest due, and finally find the principal paid (the difference in the total payment and the interest paid).

Amortized Equal Payment= P*(r((1+r)^n))/(((1+r)^n)-1))

P= Principal

r = interest rate per period

n= number of pay periods

For the equal principal payments, calculate the principal and interest using the method from the Ch. 19 PPT or the text. Remember, that there are EQUAL PRINCIPAL payments paid EACH period.