Jonathan borrowed S 13 000 a 8 annual compound interest He a

Jonathan borrowed S 13 000 a 8% annual compound interest. He agreed to repay he loan with me equal annual payments at end-of-years 1-5 How much ofthe annual payment is interest, and how much principal is there in each annual payment? Click the icon to view the interest and annuity table for discrete compounding when i = 8% per year Fill in the table below. (Round to the nearest dollar.) Payment Number Interest Payment Interest PaymetPrincipal Repayment Principal Repayment

Solution

Using Excel formula, Annual payment = PMT(8%,5,-13000) = $3,255.93

Interest paid = Beginning principal balance * 8%

Principal Paid = 3255.93 - Interest

	Beginning Principal Balance	Interest	Principal	Outstanding loan
1	$13,000.00	$1,040.00	$2,215.93	$10,784.07
2	$10,784.07	$862.73	$2,393.21	$8,390.86
3	$8,390.86	$671.27	$2,584.67	$5,806.19
4	$5,806.19	$464.50	$2,791.44	$3,014.75
5	$3,014.75	$241.18	$3,014.75	$0.00