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Amortization schedule

1. Set up an amortization schedule for a $36,000 loan to be repaidin equal installments at the end of each of the next 3 years. Theinterest rate is 6% compounded annually. Round all answers to thenearest cent.

   	Beginning		Remaining
   Year	Balance	Payment	Balance
   1	$ Â	$ Â	$ Â
   2	$ Â	$ Â	$ Â
   3	$ Â	$ Â	$ Â

2. What percentage of the payment represents interest and whatpercentage represents principal for each of the 3 years? Round allanswers to two decimal places.

   	% Interest	% Principal
   Year 1:	%	%
   Year 2:	%	%
   Year 3:	%	%

3. Why do these percentages change over time?

   1. These percentages change over time because even though thetotal payment is constant the amount of interest paid each year isdeclining as the balance declines.
   2. These percentages change over time because even though thetotal payment is constant the amount of interest paid each year isincreasing as the balance declines.
   3. These percentages change over time because even though thetotal payment is constant the amount of interest paid each year isdeclining as the balance increases.
   4. These percentages change over time because even though thetotal payment is constant the amount of interest paid each year isincreasing as the balance increases.
   5. These percentages do not change over time; interest andprincipal are each a constant percentage of the total payment.