Final answer:
To calculate the amortization schedule for a $25,000 loan with a monthly payment of $500, you can use an amortization formula. Assuming a loan term of 5 years and an interest rate of 4% per year, the formula calculates the monthly interest rate and payment. Then, the formula is used to calculate the monthly interest payment, principal payment, and remaining balance for each month.
Step-by-step explanation:
To calculate the amortization schedule for a $25,000 loan with a monthly payment of $500, we need to determine the interest rate and loan term. Once we have that information, we can use an amortization formula to calculate the schedule. Let's assume a loan term of 5 years (60 months) and an interest rate of 4% per year. Using these values, we can calculate the monthly interest rate:
Monthly interest rate = (Annual interest rate) / 12 = (4%) / 12 = 0.003333
Next, we can calculate the monthly payment amount:
Monthly payment = $500
Then, we can calculate the amortization schedule using the following formula:
Amortization payment = Monthly payment - (Loan amount × Monthly interest rate)
For each month, we subtract the interest amount from the monthly payment, and the remaining amount is used to reduce the loan balance. Here is an example of the amortization schedule for the first few months:
- Month 1: Interest payment = $25,000 × 0.003333 = $83.33, Principal payment = $500 - $83.33 = $416.67, Remaining balance = $25,000 - $416.67 = $24,583.33
- Month 2: Interest payment = $24,583.33 × 0.003333 = $81.94, Principal payment = $500 - $81.94 = $418.06, Remaining balance = $24,583.33 - $418.06 = $24,165.27
- Month 3: Interest payment = $24,165.27 × 0.003333 = $80.55, Principal payment = $500 - $80.55 = $419.45, Remaining balance = $24,165.27 - $419.45 = $23,745.81
This process is repeated for each month until the loan is fully paid off.