For Problems 11-17, Complete The Repayment Schedule For A Loan Of \$2,400 At 12 Percent For 12 Months. \[ \begin{tabular}{|c|c|c|c|c|c|} \hline & \multicolumn{5}{|c|}{Repayment Schedule For A \$2,400 Loan At 12\% For 12 Months} \\\hline
Understanding the Repayment Schedule
A repayment schedule is a detailed plan that outlines the amount of money an individual or business must pay each month to repay a loan. It is essential to create a repayment schedule to ensure that the loan is repaid on time and to avoid any potential penalties or fees. In this article, we will create a repayment schedule for a loan of $2,400 at 12 percent for 12 months.
Calculating the Monthly Payment
To calculate the monthly payment, we need to use the formula for calculating the monthly payment on a loan:
M = P[r(1+r)n]/[(1+r)n – 1]
Where:
- M = monthly payment
- P = principal loan amount ($2,400)
- r = monthly interest rate (12%/year / 12 months/year = 1%/month)
- n = number of payments (12 months)
Plugging in the values, we get:
M = $2,400[1.01(1.01)12]/[(1.01)12 – 1] M ≈ $204.95
Creating the Repayment Schedule
Now that we have calculated the monthly payment, we can create the repayment schedule. The repayment schedule will show the amount of interest paid each month, the amount of principal paid each month, and the balance of the loan after each payment.
| Month | Payment | Interest | Principal | Balance |
|---|---|---|---|---|
| 1 | $204.95 | $24.60 | $180.35 | $2,219.65 |
| 2 | $204.95 | $23.42 | $181.53 | $2,038.12 |
| 3 | $204.95 | $22.25 | $182.70 | $1,855.42 |
| 4 | $204.95 | $21.10 | $183.85 | $1,671.57 |
| 5 | $204.95 | $19.96 | $184.99 | $1,486.58 |
| 6 | $204.95 | $18.84 | $186.11 | $1,300.47 |
| 7 | $204.95 | $17.73 | $187.22 | $1,113.25 |
| 8 | $204.95 | $16.64 | $188.31 | $924.94 |
| 9 | $204.95 | $15.57 | $189.38 | $735.56 |
| 10 | $204.95 | $14.51 | $190.44 | $545.12 |
| 11 | $204.95 | $13.47 | $191.48 | $353.64 |
| 12 | $204.95 | $12.45 | $192.50 | $161.14 |
Analyzing the Repayment Schedule
From the repayment schedule, we can see that the interest paid each month decreases as the balance of the loan decreases. The principal paid each month increases as the balance of the loan decreases. The balance of the loan decreases by $1,161.51 over the 12-month period.
Conclusion
In conclusion, creating a repayment schedule for a loan is essential to ensure that the loan is repaid on time and to avoid any potential penalties or fees. By using the formula for calculating the monthly payment, we can create a repayment schedule that shows the amount of interest paid each month, the amount of principal paid each month, and the balance of the loan after each payment. In this article, we created a repayment schedule for a loan of $2,400 at 12 percent for 12 months.
Frequently Asked Questions
Q: What is a repayment schedule?
A: A repayment schedule is a detailed plan that outlines the amount of money an individual or business must pay each month to repay a loan.
Q: How do I calculate the monthly payment on a loan?
A: To calculate the monthly payment, you can use the formula: M = P[r(1+r)n]/[(1+r)n – 1]
Q: What is the difference between interest and principal?
A: Interest is the amount of money charged for borrowing money, while principal is the amount of money borrowed.
Q: How do I create a repayment schedule?
A: To create a repayment schedule, you need to calculate the monthly payment and then create a table that shows the amount of interest paid each month, the amount of principal paid each month, and the balance of the loan after each payment.
Q: What is the purpose of a repayment schedule?
Understanding Repayment Schedules
A repayment schedule is a detailed plan that outlines the amount of money an individual or business must pay each month to repay a loan. It is essential to create a repayment schedule to ensure that the loan is repaid on time and to avoid any potential penalties or fees.
Q&A: Repayment Schedules
Q: What is a repayment schedule?
A: A repayment schedule is a detailed plan that outlines the amount of money an individual or business must pay each month to repay a loan.
Q: How do I calculate the monthly payment on a loan?
A: To calculate the monthly payment, you can use the formula: M = P[r(1+r)n]/[(1+r)n – 1]
Q: What is the difference between interest and principal?
A: Interest is the amount of money charged for borrowing money, while principal is the amount of money borrowed.
Q: How do I create a repayment schedule?
A: To create a repayment schedule, you need to calculate the monthly payment and then create a table that shows the amount of interest paid each month, the amount of principal paid each month, and the balance of the loan after each payment.
Q: What is the purpose of a repayment schedule?
A: The purpose of a repayment schedule is to ensure that the loan is repaid on time and to avoid any potential penalties or fees.
Q: Can I change my repayment schedule?
A: Yes, you can change your repayment schedule by contacting your lender and requesting a modification to your loan terms.
Q: What happens if I miss a payment?
A: If you miss a payment, you may be charged a late fee and your credit score may be affected. It is essential to make timely payments to avoid any potential penalties or fees.
Q: Can I pay off my loan early?
A: Yes, you can pay off your loan early by making extra payments or by paying off the entire balance of the loan at once.
Q: How do I know if I need a repayment schedule?
A: You need a repayment schedule if you have a loan with a fixed interest rate and a fixed repayment term.
Q: Can I use a repayment schedule for a personal loan?
A: Yes, you can use a repayment schedule for a personal loan.
Q: Can I use a repayment schedule for a business loan?
A: Yes, you can use a repayment schedule for a business loan.
Q: What are the benefits of using a repayment schedule?
A: The benefits of using a repayment schedule include:
- Ensuring that the loan is repaid on time
- Avoiding any potential penalties or fees
- Reducing the amount of interest paid over the life of the loan
- Improving credit score
Q: What are the risks of not using a repayment schedule?
A: The risks of not using a repayment schedule include:
- Missing payments and incurring late fees
- Damaging credit score
- Paying more interest over the life of the loan
- Facing potential penalties or fees
Conclusion
In conclusion, a repayment schedule is a crucial tool for individuals and businesses to ensure that loans are repaid on time and to avoid any potential penalties or fees. By understanding how to create a repayment schedule and using it effectively, you can reduce the amount of interest paid over the life of the loan and improve your credit score.