Chapter 4 P4–46 Loan amortization schedule Joan Messineo borrowed $15,000 at a 14% annual rate of interest to be repaid over 3 years. The loan is amortized into three equal, annual, end-of-year payments.

FIN 419 Chapter 4 P4–46 Loan amortization schedule Joan Messineo borrowed $15,000 at a 14% annual rate

FIN 419 Finance for Decision making

FIN 419 C4 P4–46 Joan Messineo                                          SOLUTION

University of Phoenix

Chapter 4 P4–46 Loan amortization schedule Joan Messineo borrowed $15,000 at a 14% annual rate of interest to be repaid over 3 years. The loan is amortized into three equal, annual, end-of-year payments.

a. Calculate the annual, end-of-year loan payment.

b. Prepare a loan amortization schedule showing the interest and principal breakdown of each of the three loan payments.

c. Explain why the interest portion of each payment declines with the passage of time.

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