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

Financial statements in european countries, Q. Financial statements in Euro...

Q. Financial statements in European countries? In a few European countries the financial statements contain secret reserves. These secret reserves occur from a company not repo

Accounting Principles, what are the implications of applying accounting con...

what are the implications of applying accounting concepts wrongly

A firm is evaluating two machines, A firm is evaluating two machines. The f...

A firm is evaluating two machines. The first costs $250,000 and will require annual maintenance of $30,000 per year for 10 years. At the end of 10 years, the salvage value will b

Illustrate a simple accounting system, Q. Illustrate a simple accounting sy...

Q. Illustrate a simple accounting system? James Stevens was captivating an accounting course at State University. as well he was helping companies find accounting systems that

Define current assets, Q. Define Current assets? Current assets are cas...

Q. Define Current assets? Current assets are cash and other assets that a business is able to convert to cash or uses up in a relatively short period one year or one operating

What is classified balance sheet, Q. What is classified balance sheet? ...

Q. What is classified balance sheet? The balance sheets we presented thus far have been unclassified balance sheets. An unclassified balance sheet has three major categories li

Credit - accounting entry, Credit -- an accounting entry on the bottom or r...

Credit -- an accounting entry on the bottom or right of a balance sheet. Generally an increase inliabilities or capital or a reduction in assets. Opposite of credit is debit. Every

What are the golden rules of accounts, Personal accounts --> Debit the bene...

Personal accounts --> Debit the benefit receiver, credit the benefit giver Real accounts --> Debit what comes in, credit what goes out Nominal Accounts --> Debit all expenses

The book of Deven Verma could not be tallied. The accountant, The book of D...

The book of Deven Verma could not be tallied. The accountant transferred the difference of Rs. 1,270 in the suspense account on the debit side. The following mistakes were found la

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