Question

Prepare the first two years of a straight-line amortization : round your intermediate and final answers to the nearest whole dollar.

Answer 1

To prepare the first two years of a straight-line amortization, divide the total loan amount by the number of years of the loan to calculate the yearly payment amount. Subtract the yearly payment from the initial loan amount to find the remaining balance. Repeat these steps for the second year using the updated remaining balance.

Step-by-step explanation:

Amortization is a method used to gradually reduce a loan or debt by making regular payments. In straight-line amortization, the amount paid towards the principal and interest is the same for each payment. To prepare the first two years of a straight-line amortization:

1. Divide the total loan amount by the number of years of the loan to calculate the yearly payment amount.
2. Subtract the yearly payment amount from the initial loan amount to find the remaining balance.
3. Repeat steps 1 and 2 for the second year, using the updated remaining balance.