Example 22A: Loan Amortization This example illustrates the initial monthly payments of a loan with a principal balance of $50,000, an interest rate of 10%, and a payment period of 3 years or 36 months.

Loan Amortization Schedule

Principal borrowed: $50,000

Total payments: 36

Annual interest rate 10.00% (monthly rate = 0.8333%)

Payment # Total Payment Principal Portion of Payment Interest Expense Portion of Payment Remaining Principal Balance Beginning balance = $50,000.00 1 $1,613.36 $1,196.69 $416.67 $48,403.31 2 1,613.36 1,206.67 406.69 47,596.64 3 1,613.36 1,216.72 396.64 46,379.92 4 1,613.36 1,226.86 386.50 45,153.06 5 1,613.36 1,237.08 376.28 43,915.98 6 1,613.36 1,247.39 365.97 42,668.58 Practice Exercise 22I: Loan Amortization This exercise illustrates a different principal amount than Example 22A, but computed at the same monthly interest rate and the same number of payments.

Required Compute the first 6 months of a loan amortization schedule with a principal balance of $60,000, an interest rate of 10%, and a payment period of 3 years or 36 months.

Loan Amortization Schedule

Principal borrowed: $60,000

Total payments: 36

Annual interest rate 10.00% (monthly rate = 0.8333%)

Payment # Total Payment Principal Portion of Payment Interest Expense Portion of Payment Remaining Principal Balance Beginning balance = $60,000.00 1 2 3 4 5 6