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Joan Messineo borrowed $45,000 at a 4% annual rate of interest that she must repay over 3 years. The loan

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Joan Messineo borrowed $45,000 at a 4% annual rate of interest that she must repay over 3 years. The loan is amortized into three equal, end-of-year payments.
a. Calculate the end-of-year loan payment.
b. Prepare a loan amortization schedule showing the interest and principal breakdown of each of the three loan payments.
c. Explain why the interest portion of each payment declines with the passage of time.

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a Treat the problem like an ordinary annuity with n 3 r 4 PV 45 000 and solve for PMT Loan pa…View the full answer


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Principles of Managerial Finance

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Authors: Chad J. Zutter, Scott B. Smart

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Question Details
Chapter # 5
Section: Problems
Problem: 48
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Question Posted: May 23, 2019 08:36:33
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An amortization schedule (sometimes called an amortization table) is a table detailing each periodic payment on an amortizing loan. Each calculation done by the calculator will also come with an annual and monthly amortization schedule above. Each repayment for an amortized loan will contain both an interest payment and payment towards the principal balance, which varies for each pay period. An amortization schedule helps indicate the specific amount that will be paid towards each, along with the interest and principal paid to date, and the remaining principal balance after each pay period

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