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??(Loan amortization)??On December? 31, Beth Klemkosky bought a yacht for ?$100,000. She paid ?$20,000 down and...

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Finance

??(Loan amortization)??On December? 31, Beth Klemkosky bought ayacht for ?$100,000. She paid ?$20,000 down and agreed to pay thebalance in 14 equal annual installments that include both theprincipal and 15 percent interest on the declining balance.

How big will the annual payments? be?

On December? 31, Beth Klemkosky bought a yacht for ?$100,000 andpaid ?$20,000 ?down, how much does she need to borrow to purchasethe? yacht?

Answer & Explanation Solved by verified expert
3.7 Ratings (725 Votes)

amount borrowed = price - down = 100000-20000=80000

Annual rate(M)= yearly rate/12= 15.00% Annual payment= 13975.08
Year Beginning balance (A) Annual payment Interest = M*A Principal paid Ending balance
1 80000.00 13975.08 12000.00 1975.08 78024.92
2 78024.92 13975.08 11703.74 2271.34 75753.58
3 75753.58 13975.08 11363.04 2612.04 73141.54
4 73141.54 13975.08 10971.23 3003.85 70137.69
5 70137.69 13975.08 10520.65 3454.43 66683.26
6 66683.26 13975.08 10002.49 3972.59 62710.67
7 62710.67 13975.08 9406.60 4568.48 58142.20
8 58142.20 13975.08 8721.33 5253.75 52888.45
9 52888.45 13975.08 7933.27 6041.81 46846.63
10 46846.63 13975.08 7026.99 6948.08 39898.55
11 39898.55 13975.08 5984.78 7990.30 31908.25
12 31908.25 13975.08 4786.24 9188.84 22719.41
13 22719.41 13975.08 3407.91 10567.17 12152.24
14 12152.24 13975.08 1822.84 12152.24 0.00
Where
Interest paid = Beginning balance * Annual interest rate
Principal = Annual payment – interest paid
Ending balance = beginning balance – principal paid
Beginning balance = previous Year ending balance

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Transcribed Image Text

??(Loan amortization)??On December? 31, Beth Klemkosky bought ayacht for ?$100,000. She paid ?$20,000 down and agreed to pay thebalance in 14 equal annual installments that include both theprincipal and 15 percent interest on the declining balance.How big will the annual payments? be?On December? 31, Beth Klemkosky bought a yacht for ?$100,000 andpaid ?$20,000 ?down, how much does she need to borrow to purchasethe? yacht?

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