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 do you mean by risk management contracts, Q. What do you mean by Risk ...

Q. What do you mean by Risk management contracts? In the normal course of business the Company utilizes a variety of off-balance-sheet financial instruments to manage its expos

Internal control devices for banking activities, Internal control devices f...

Internal control devices for banking activities include signature cards, deposit tickets, checks, and bank statements. 01.) True 02.) False True or False?

Requirements for accounting standards, The information contained in publish...

The information contained in published financial statements is of specific importance to external users, as shareholders and investors. Without any information they would not be ca

Can you explain about liabilities, Q. Can you explain about Liabilities? ...

Q. Can you explain about Liabilities? Liabilities -- amounts owed by a company to others. Current liabilities are those amounts duewithin one year or less and generally include

Enumerate the term- cash discounts, Enumerate the term- Cash discounts ...

Enumerate the term- Cash discounts Offered to encourage prompt and early payment by buyer. Cash discounts are recorded in accounting records of both the buyer and the seller. S

Measurement in financial statements, Q. Measurement in financial statements...

Q. Measurement in financial statements? In December 1984 the FASB issued Statement of Financial Accounting Concepts No. 5 The Recognition and Measurement in Financial Statement

A store receives $400 cash after offering a chain discount, A store receive...

A store receives $400 cash after offering a chain discount of 10/10/5 on a good. What was the list price? A. $492.20 B. $519.82 C. $533.33 D. $612.00

Cost concept, The resources as machinery, property, buildings and land righ...

The resources as machinery, property, buildings and land rights etc. such a business owns are termed as assets. The money values allocated to assets are derived from the cost conce

State the term - partnership, State the term - Partnership A partnershi...

State the term - Partnership A partnership exists where at least two individuals carry on a business together with intention of making a profit. Partnerships have much in commo

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