Question

12. Epitome Healthcare has just borrowed $1,000,000 on a five-year, annual payment term loan at a 15 percent rate. The first payment is due one year from now. Construct the amortization schedule for this loan

Answer 1

Answer:

attached loan-schedule

Explanation:

We determinate the quota of the loan:

$PV \div \frac{1-(1+r)^{-time} }{rate} = C$

PV 1,000,000

time 5

rate 0.15

$1000000 \div \frac{1-(1+0.15)^{-5} }{0.15} = C$

C  $ 298,315.552

Now, we solve for the loan schedule:

interest: loan beginning balance x rate

principal amortization:

cuota less interest

ending principal:

beginning less principal amortization for the year

There is a rounding error of 3 cent but it is acceptable.