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Suppose Musashi receives a $21,000.00 loan to be repaid in equal installments at the end of each of the next 3 years. The interest rate is 4% compounded annually Use the formula for the present value of an ordinary annuty to find this payment amount PVA - PMTX 7 PMT = PVAX In this case, PVA equals I equals and Nequals Using the formula for the present value of an ordinary annuity, the annual payment amount for this ton is Because this payment is fixed over time, enter thus annual payment metent in the "Payment" column of the foliowing table for all three years Each payment consists of two parts--interest and repayment of principal. You can calculate the interest in year 1 by multiplying the loan balance at the beginning of the year (PA) by the interest rate (1). The repayment of principal is equal to the payment (PMT) minus the interest charge for the year The Interest paid in year 1 is Enter the values for interest and repayment of prinopal for year in the following table Because the balance at the end of the first year is equal to the beginning amount minus the repayment of principal, the ending balance for year 1 the beginning amount for year 2 This is Using the same process as you did for year 1, complete the following amortization table by filling in the remaining values for years 2 and 3. Year Beginning Amount $21,000.00 Payment Interest Repayment of Principal 1 Ending Balance 2 3 $0.00 Complete the following table by determining the percentage of each payment that represents interest and the percentage that represents principal for each of the three years. Percentage of Payment Year 1 Year 2 Year 3 Payment Component Interest Repayment of Principal TOTAL SCORE: 1/10 Grade Step 2 Suppose Musashi receives a $21,000.00 loan to be repaid in equal installments at the end of each of the next 3 years. The interest rate is 4% compounded annually Use the formula for the present value of an ordinary annuty to find this payment amount PVA - PMTX 7 PMT = PVAX In this case, PVA equals I equals and Nequals Using the formula for the present value of an ordinary annuity, the annual payment amount for this ton is Because this payment is fixed over time, enter thus annual payment metent in the "Payment" column of the foliowing table for all three years Each payment consists of two parts--interest and repayment of principal. You can calculate the interest in year 1 by multiplying the loan balance at the beginning of the year (PA) by the interest rate (1). The repayment of principal is equal to the payment (PMT) minus the interest charge for the year The Interest paid in year 1 is Enter the values for interest and repayment of prinopal for year in the following table Because the balance at the end of the first year is equal to the beginning amount minus the repayment of principal, the ending balance for year 1 the beginning amount for year 2 This is Using the same process as you did for year 1, complete the following amortization table by filling in the remaining values for years 2 and 3. Year Beginning Amount $21,000.00 Payment Interest Repayment of Principal 1 Ending Balance 2 3 $0.00 Complete the following table by determining the percentage of each payment that represents interest and the percentage that represents principal for each of the three years. Percentage of Payment Year 1 Year 2 Year 3 Payment Component Interest Repayment of Principal TOTAL SCORE: 1/10 Grade Step 2

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