Problem $4-20$

Amortization Schedule

Consider a $$25,000$ loan to be repaid in equal installments at the end of each of the next $5$ years. The interest rate is $8\%.$

a$.$ Set up an amortization schedule for the loan. Round your answers to the nearest cent. Enter $"0"$ if required

b$.$ How large must each annual payment be if the loan is for $$50,000?$ Assume that the interest rate remains at $8\%$ and that the loan is still paid off over $5$ years. Round your answer to the nearest cent.

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payments are spread out over twice as many periods. Round your answer to the nearest cent.

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Why are these payments not half as large as the payments on the loan in part b$?$

I. Because the payments are spread out over a longer time period, less interest is paid on the loan, which raises the amount of each payment.

II$.$ Because the payments are spread out over a longer time period, less interest is paid on the loan, which lowers the amount of each payment.

III. Because the payments are spread out over a shorter time period, more interest is paid on the loan, which lowers the amount of each payment.

IV$.$ Because the payments are spread out over a longer time period, more interest must be paid on the loan, which raises the amount of each payment.

v$.$ Because the payments are spread out over a longer time period, more principal must be paid on the loan, which raises the amount of each payment.