Question

You just took a $10,000, 5-year loan. Payments at the end of each year are flat (equal in every year) at an interest rate of 15%. Calculate the appropriate loan table, showing the breakdown in each year between principal and interest.

Answer 1

To calculate the appropriate loan table for a $10,000, 5-year loan at an interest rate of 15%, you can use the formula for the equal annual payment of a loan and the formulas for calculating interest and principal. The breakdown of principal and interest for each year can be calculated using these formulas.

Step-by-step explanation:

To calculate the appropriate loan table, we need to determine the equal annual payments and then break down each payment into principal and interest. For a $10,000, 5-year loan at an interest rate of 15%, we can use the formula for the equal annual payment of a loan:

Equal annual payment = Principal / Present Value Annuity Factor

Using the formula, the equal annual payment would be $3,161.50. To calculate the breakdown of principal and interest for each year, we can use the formula:

Interest = Remaining Balance * Interest Rate

Principal = Equal annual payment - Interest

Using these formulas, we can generate the appropriate loan table showing the breakdown in each year between principal and interest.