**Unformatted text preview: **The payment for a loan repaid with equal payments is the annuity payment with the loan value as the PV of the annuity. So, the loan payment will be: PVA = $42,000 = C {[1 – 1 / (1 + .08) 5 ] / .08} C = $10,519.17 The interest payment is the beginning balance times the interest rate for the period, and the principal payment is the total payment minus the interest payment. The ending balance is the beginning balance minus the principal payment. The ending balance for a period is the beginning balance for the next period. The amortization table for an equal payment is: Year Beginning Balance Total Payment Interest Payment Principal Payment Ending Balance 1 $42,000.00 $10,519.17 $3,360.00 $7,159.17 $34,840.83 2 34,840.83 10,519.17 2,787.27 7,731.90 27,108.92 3 27,108.92 10,519.17 2,168.71 8,350.46 18,758.47 4 18,758.47 10,519.17 1,500.68 9,018.49 9,739.97 5 9,739.97 10,519.17 779.20 9,739.97 0.00 In the third year, $2,168.71 of interest is paid....

View
Full Document