Phil borrowed $5,400. After a downpayment of $1,000, he will repay the loan in 3 years with semi-annual...

Question

5. Phil borrowed $5,400. After a downpayment of $1,000, he will repay the loan in 3 years with semi-annual payments at an interest rate of 6%.
According to the Interest Rate per Period Table, the factor for 6 compounding periods at 3% is 0.18460.
The amortization schedule for Phil's loan is provided below. Find the semi-annual payment, and use it to calculate both the interest for Period 1 and the portion applied to the principal in Period 1.

SnapAndSolve AI · Accepted Answer

To find the semi-annual payment, we use the formula for the annuity payment:

PMT = P * (r(1+r)^n) / ((1+r)^n - 1)

Where:

P = Principal = $4,400
r = semi-annual interest rate = 6% / 2 = 3% = 0.03
n = total number of payments = 3 years * 2 = 6

Using the factor given for 6 compounding periods at 3%, which is 0.18460:

PMT = $4,400 * 0.18460 = $812.24

Now, calculate the interest for Period 1:

Interest for Period 1 = Principal * r = $4,400 * 0.03 = $132.00

Calculate the portion applied to the principal in Period 1:

Portion Applied to Principal = PMT - Interest for Period 1 = $812.24 - $132.00 = $680.24

contact us

Contact Info

Phil borrowed $5,400. After a downpayment of $1,000, he will repay the loan in 3 years with semi-annual...

Answer

Have a similar question?

More math questions