Question

g Jack and Jill borrow $21,000 at 7.2% amortized over 6 years to drill a well and renovate their kitchen and bathrooms. Assuming that the monthly principal and interest payments are made as agreed, what is the loan balance at the end of 3 years

Answer 1

The loan balance at the end of 3 years is $11,626.26.

Step-by-step explanation:

Prepare an Amortization Table to determine the loan balance at end of year 3

First, enter the following data in Financial Calculator to find the PMT, payment per month:

Pv = $21,000

r = 7.2%

n = 6 × 12 = 72

P/yr = 12

Fv = $0

PMT = ? - $360.0493

Thus the payment PMT per month is $360.0493.

Year 3

The following are balances extracted from Amortization schedule for Year 3.

Note : 36 months would have expired at end of year 3.

Principle = $ 3,619.94

Interest = $1,060.70

Balance = $11,626.26

Conclusion :

The loan balance at the end of 3 years is $11,626.26