Question

Excel Online Structured Activity: Amortization schedule 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. Open spreadsheet a. Complete an amortization schedule for a $15,000 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 Repayment Ending Year Balance Payment Interest of Principal Balance 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. % Interest % Principal Year 1: % % Year 2: % % Year 3: % %

Answer 1

Answer:

a. Ending balance in year 3 = $0

b.

            % Interest      % Principal

Year 1:      28.82%             71.18%

Year 2:     20.28%            79.72%

Year 3:      10.71%             89.29%

Explanation:

a. Complete an amortization schedule for a $15,000 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.

Note: See part a of the attached excel file for the calculations.

In the excel function, the yearly payment is calculated by using PMT function in Excel: =PMT(12%,3,-15000,,)

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.

Note: See part b of the attached excel file for the calculations.

Download xlsx