o ded annually amortization schedule for a $19,000 loon to be repaid in equal in
ID: 2811654 • Letter: O
Question
o ded annually amortization schedule for a $19,000 loon to be repaid in equal installments at the end of each of the next three years. The interest rate is 9% co Complete a an amount is zero, enter "O". Do not round intermediate calculations. Round your answers to the nearest cent. a Ending Balance Yeer Belance Payment of Princips 7,506 04 $ [ ,506.04 1.710 s 5,796 04 s 19,000 13,203.96 13,203.96 6,886.28 1 s 1,710$5,796.04 13,203.96 1,1 88.35 6,317.68 6,886.28 7,506.04. 619.77 [ 6,886.28 b. What percentage of the payment represents interest and what percentage represents principal for esch of the three years? Do not round intermediate calculations. Round your answers to two decimal places %Interest %Principal Year 1 Year 2 Year 3: Why do these percentages change over time t. These percentages change over time because even though the total payment is constant the amount of interest paid each year is declining as the remalining or outstanding balance dedines the remaining or . These percentages change over tirme because even though the totat payment is constant the smount of interest paid each year is increasing 1m. . These percentages change over time because even though the total payment is constant the amount of interest paid each year is declining as the remaining or outstanding balance increasS V. These percentages change over time because even though the total peyment is constant the amount of interest paid each year is increasing as the remaining or V. These percentages do not change over time interest and principal are each a constant percentage of the total paymentExplanation / Answer
Total Payment represent the principal + interest. so to find the % of interest we Divide interest from total payment and the same is done with principal also.
Year 1
Total Payment = $7506.04
Interest Component = $1710
Interest % = ($1710 / $7506.04) * 100 i.e. 22.78 %
Principal Component = $ 5796.04
Principal % = ($5796.04 / $7506.04)*100 i.e. 77.22%
Year 2
Total Payment = $7506.04
Interest Component = $1188.35
Interest % = ($1188.35 / $7506.04) * 100 i.e. 15.83 %
Principal Component = $ 6317.68
Principal % = ($6317.68 / $7506.04)*100 i.e. 84.17%
Year 3
Total Payment = $7506.04
Interest Component = $619.77
Interest % = ($619.77 / $7506.04) * 100 i.e. 8.26 %
Principal Component = $ 6886.27
Principal % = ($6886.27 / $7506.04)*100 i.e. 91.74%
Why do percentage change over time?
Answer is I) These percentage change over time because even though the total payment is constant the amount of interest paid each year is declining as the remaing outstanding blance declines.
Explanation - As we know Interest is calculated on the outstanding balance each year. So when the outstanding balance declines interest payment will also declines. Further the Total Payment is fixed and when the interest payment declines the repayment is shifted towards principal payment and so the interest % also declines and principal % increases.
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