question archive A debt of $4000 is to be amortized by equal payments at the end of every quarter for 1
Subject:FinancePrice:2.86 Bought18
A debt of $4000 is to be amortized by equal payments at the end of every quarter for 1.5 years. If
the interest charged is 12% compounded quarterly, find the principal after each payment is made. Also
calculate the total amount of interest pad in this contract.
Calculate quarterly payment for debt as shown below: | ||||||||
Quarterly payment | Debt amount/(1-(1+r^-n)/r) | |||||||
Quarterly rate | 3.00% | 12%/4 | ||||||
No of payments | 6 | 1.5*4 | ||||||
Quarterly payment | 4000/(1-(1.03^-6)/0.03) | |||||||
Quarterly payment | 4000/5.4172 | |||||||
Quarterly payment | 738.39 | |||||||
Prepare amortization table as shown below: | ||||||||
Period | Quarterly payment | Interest | Principal | Loan balance | ||||
1 | $738.39 | $120.00 | 4000*3% | $618.39 | 738.39-120 | $3,381.61 | 4000-618.39 | |
2 | $738.39 | $101.45 | 3381.61*3% | $636.94 | 738.39-101.45 | $2,744.67 | 3381.61-636 | |
3 | $738.39 | $82.34 | 2744.67*3% | $656.05 | 738.39-82.34 | $2,088.62 | 2744.67-656 | |
4 | $738.39 | $62.66 | 2088.62*3% | $675.73 | 738.39-62.66 | $1,412.89 | 2088.62-675 | |
5 | $738.39 | $42.39 | 1412.89*3% | $696.00 | 738.39-42.39 | $716.88 | 1412.89-696 | |
6 | $738.39 | $21.51 | 716.88*3% | $716.88 | 738.39-21.51 | $0.00 | 716.88-716 | |
$430.34 | ||||||||
Thus, total interest paid is $430.34 | ||||||||