Jonathan wishes to borrow $180 000 from a commercial bank.  He was told that the loan would be amortized over five years and that payment could be made at the beginning or at the end of each year.

 Please assist Jonathan by answering the following questions:

a. Explain to Jonathan, what is the purpose of a loan amortization schedule?

b. Jonathan borrows $180 000 at 9% per annum for five years.  The loan is repayable in five equal instalments at the beginning of the year.  What is the annual payment?

             

c. Let us assume that Jonathan makes the payments at the end of the year, What is the annual payment?                                                                                      

 

d. Prepare the amortization schedule for the loan if payments are made at the end of the year.