Calculate interest rate, Accounting Basics

I chose table 2-4 Loan Amortization Schedule, $100,000 at 6% for 5 years to discuss. Table 2-4 relates to the other two tables in that it is the opposite of the other two tables. Table 2-4 illustrates paying down an initial amount borrowed, where the other two tables illustrate either the present or future value of money invested.

If one were to use a calculator to solve the amortization of a loan, we would input N= length of the loan, I/YR= interest rate, initial loan amount, PV=100000, and the ending value or FV=0 (Brigham & Houston,2007).

If one were to use Microsoft Excel to solve the problem, I would list the length of the loan vertically and horizontally would be the Beginning amount, payment amount, interest, amount paid to principal and the ending balance.

My example: If I were to take out an auto loan for $16,000 at 5% and it had to be repaid in 4 years:

Year

Beginning Amount

Payment

Interest

Repayment of Principal

Ending Balance

1

$16,000

$4512.19

$800

$3712.19

$12287.81

2

12287.81

$4512.19

614.39

3897.80

8390.01

3

8390.01

4512.19

419.50

4092.69

4297.32

4

4297.32

4512.19

214.87

4298.32

$0

Initially, I solved this problem using my financial calculator to find the payment amount. Then I figured out the interest on year one (16000x.05), I subtracted the interest from the payment amount to find the principal. I subtracted the principal payment from the beginning amount to get the ending balance. I then carried the ending balance to the next line to use as the starting figure and went from there.

Posted Date: 3/18/2013 5:31:41 AM | Location : United States







Related Discussions:- Calculate interest rate, Assignment Help, Ask Question on Calculate interest rate, Get Answer, Expert's Help, Calculate interest rate Discussions

Write discussion on Calculate interest rate
Your posts are moderated
Related Questions
exploration costs for mining companies are assets?.

ERS is a business process among trading partners that conduct commerce without invoices. In an ERS transaction the supplier ships goods based upon an Advance Shipping Notice (ASN)

What steps would you take before approving an invoice for payment? Ans) Following steps should be taken.. ? Certify the invoice once it is matched for checking any holds..


The injection molding department of a company uses an average of 30 gallons of special lubricant a day. The supply of the lubricant is replenished when the amount on hand is 170 ga

At the end of this assignment, you will have: Identified the facts and accounting issues at AVE. Researched the appropriate accounting literature. Analyzed, interpreted,

Q. Explain about statement of cash flows? Retained earnings usually consist of the accumulated net income of the corporation minus dividends distributed to stockholders. We exa

A client comes to you for investment advice on his $500,000 winnings from the lottery. He has been offered the following options by three different financial institutions and reque

Spin off is making new company by selling or distributing the shares of existing company

what do you mean by 90% of the entire issue to be received before the allotment of shares?