You bought a house 2 years ago with a $200,000 mortgage. This loan requires only

ID: 2728702 • Letter: Y

Question

You bought a house 2 years ago with a $200,000 mortgage. This loan requires only annual payments for 20 years. You're now preparing your taxes and want to know how much interest you paid during the second year of the loan. If the loan interest rate is 8%, prepare an amortization schedule that shows second-year total interest paid and the end-of-year loan balance. Interest Owing at Principal Owing Year Payment (S) End of Year (S) at End of Year (S) 1 2 Interest Owing at Principal Owing Year Payment (S) End of Year (S) at End of Year (S) 1 (Round to the nearest cent.) Interest Owing at Principal Owing Year Payment (S) End of Year (S) at End of Year (S) 1 20,370,44 (Round to the nearest cent.) Interest Owing at Principal Owing Year Payment (S) End of Year (S) at End of Year (S) 1 20,370,44 16,000.00 (Round to the nearest cent.) Interest Owing at Principal Owing Year Payment (S) End of Year (S) at End of Year (S) 1 20,370,44 16,000,00 195,629,56 2 (Round to the nearest cent.) Interest Owing at Principal Owing Year Payment (S) End of Year (S) at End of Year (S)

Explanation / Answer

ANNUAL PAYMENT

= LOAN AMOUNT / PVIFA 8% , 20 PERIODS

= $200000 / 9.8181

= $20370.54

$16000

($200000 * 8%)

$4370.54

($20370.54 - $16000)

$195629.46

($200000 - $4370.54)

$15650.36

($195629.46 * 8%)

$4720.18

($20370 - $15650.36)

$190909.28

($195629.46 - $4720.18)

YEAR ANNUAL INSTALMENT INTEREST PRINCIPAL BALANCE PRINCIPAL AT YEAR END 1 $20370.54