Answer to Question #274531 in Financial Math for Eg Cuya

Question #274531

CREATE AN AMORTILIZATION SCHEDULE USING THE FOLLOWING INFORMATION

Present Value: 25,000

Interest: 3% compounded monthly


A. Create an amortilization schedule if the payment should be done every end of the month for 1 year

B. Create an amortilization schedule if the payment should be done every beginning of the month for 1 year


1
Expert's answer
2021-12-03T11:08:31-0500

A. Create an amortilization schedule if the payment should be done every end of the month for 1 year


If payment is done at end of every month; the amount at the end of each month will be calculated using the formula;


A=P(1+r)nA=P(1+r)^n


Interest is calculated by using the formula; P(1+r)nPP(1+r)^n-P

For the first month;

P(1+r)nPP(1+r)^n-P= 25000(1+0.03)125000=75025000(1+0.03)^1-25000=750


The armotilization schedule will be as shown below;





B. Create an amortilization schedule if the payment should be done every beginning of the month for 1 year


If payment is done at beginning of every month; the amount at the end of each month will be calculated using the formula;


The principal at the beginning of the first month if payment is done at the start will be;


P=25000+750=25750P=25000+750=25750


the amount at the end of each month will be calculated using the formula;


A=P(1+r)nA=P(1+r)^n


Interest is calculated by using the formula; P(1+r)nPP(1+r)^n-P

For the first month;

P(1+r)nPP(1+r)^n-P= 25750(1+0.03)125000=772.525750(1+0.03)^1-25000=772.5


The armortilization schedule will be as shown below;






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