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

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??(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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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?