Calculate interest rate, Accounting Basics

Assignment Help:

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.


Related Discussions:- Calculate interest rate

What is intangible assets, Q. What is Intangible Assets? Intangible Ass...

Q. What is Intangible Assets? Intangible Assets are items likecopyrights, patents, licenses, trademarks, franchises andother kinds of rights or things of value to a company tha

Debits and Credits, When does something that is a debit becomes a credit?

When does something that is a debit becomes a credit?

What is investment banking, Investment banking is a is an instrument which ...

Investment banking is a is an instrument which is used by the financial organization to take a improved investment decision like issuing IPO stocks bond etc.

Objectives of financial reporting, Q. Objectives of financial reporting? ...

Q. Objectives of financial reporting? Financial reporting objectives are the broad overriding objectives sought by accountants engaging in financial reporting. According to the

Explain about sales account, Q. Explain about Sales account? In theory ...

Q. Explain about Sales account? In theory sellers could record both sales allowances and sales returns as debits to the Sales account for the reason that they cancel part of th

State the list of special journals, State the list of Special journals ...

State the list of Special journals Purchases - All credit purchases of merchandise Cash Payments - All payments of cash Sales - All credit sales of merchandise

Final accounts, stpes to be taken prepaing for final accounts

stpes to be taken prepaing for final accounts

Principles of Taxation for Business and Investment Planning, Compare and co...

Compare and contrast AICPA SSTS to Circular 230 related to knowledge of client''s omission.

What do you mean by" bank reconciliation"?, A Bank reconciliation manipulat...

A Bank reconciliation manipulates cross verifying the entries in the cash book(bank balance)with that of pass book. Mostly the reasons for disagreement of cash book with that of

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd