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If you borrow $40,000 today and agree to repay the loan in 24 annual payments, how...

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Finance

If you borrow $40,000 today and agree to repay the loan in 24annual payments, how much do you owe every year? Assume this is anamortized loan with 10% interest rate, compounded annually?

Answer & Explanation Solved by verified expert
4.2 Ratings (586 Votes)

Loan amount = 40000
Interest rate annual= 10% or 0.1
Time in years (n)= 24

Equal annual payments for loan formula = P* i *((1+i)^n)/((1+i)^n-1)

40000*0.10*((1+0.10)^24)/(((1+0.10)^24)-1)
$4,451.99

Amount owed every year shall be $ 4451.99

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Loan amortization table
Year Beginning balance Annual Payment Interest @10% Principal payment received

Ending balance
(Beg. Bal.*8%) (Payment - interest)

(Beg. Balance - Loan red.)
1 40000.00 4451.99 4000.00 451.99 39548.01
2 39548.01 4451.99 3954.80 497.19 39050.82
3 39050.82 4451.99 3905.08 546.91 38503.91
4 38503.91 4451.99 3850.39 601.60 37902.31
5 37902.31 4451.99 3790.23 661.76 37240.55
6 37240.55 4451.99 3724.05 727.94 36512.61
7 36512.61 4451.99 3651.26 800.73 35711.88
8 35711.88 4451.99 3571.19 880.80 34831.08
9 34831.08 4451.99 3483.11 968.88 33862.20
10 33862.20 4451.99 3386.22 1065.77 32796.43
11 32796.43 4451.99 3279.64 1172.35 31624.08
12 31624.08 4451.99 3162.41 1289.58 30334.50
13 30334.50 4451.99 3033.45 1418.54 28915.95
14 28915.95 4451.99 2891.60 1560.40 27355.56
15 27355.56 4451.99 2735.56 1716.44 25639.12
16 25639.12 4451.99 2563.91 1888.08 23751.04
17 23751.04 4451.99 2375.10 2076.89 21674.16
18 21674.16 4451.99 2167.42 2284.58 19389.58
19 19389.58 4451.99 1938.96 2513.03 16876.55
20 16876.55 4451.99 1687.65 2764.34 14112.21
21 14112.21 4451.99 1411.22 3040.77 11071.44
22 11071.44 4451.99 1107.14 3344.85 7726.60
23 7726.60 4451.99 772.66 3679.33 4047.26
24 4047.26 4451.99 404.73 4047.26 0.00
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