To construct an amortization schedule for the loan, calculate the interest and principal payments for each period. For first year The interest for the first 6 months is $25 and The principal payment is $975. For Second year The interest for the first 6 months is $24.38 and The principal payment is $1,975.62. For third year The interest for the first 6 months is $24.69 and The principal payment is $2,975.31.
To construct an amortization schedule for the loan, we need to calculate the interest and principal payments for each period.
The loan is to be repaid over three years, with payments of $1,000, $2,000, and $3,000 at the end of the first, second, and third year respectively.
The interest is payable semiannually at a nominal rate of 5%.
Let's break down the calculation for each period:
First year: The loan amount is $1,000. The interest for the first 6 months is ($1,000 * 5%)/2 = $25. The principal payment is $1,000 - $25 = $975.
Second year: The loan amount carried forward is $975. The interest for the next 6 months is ($975 * 5%)/2 = $24.38. The principal payment is $2,000 - $24.38 = $1,975.62.
Third year: The loan amount carried forward is $1,975.62. The interest for the next 6 months is ($1,975.62 * 5%)/2 = $24.69. The principal payment is $3,000 - $24.69 = $2,975.31.
Using this information, we can construct an amortization schedule that shows the principal and interest payments for each period.