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a portion of loan payments goes toward covering the interest due on the loan, while the rest reduces the loan’s balance. early in a loan’s life, its balance is high and a substantial portion goes toward interest, but over time the balance declines, as does the portion paid toward interest. an amortization schedule illustrates how interest is covered and principal repaid by loan payments over time. you have secured an 8%, $500,000 bank loan to be paid off in seven equal end-of-year annual payments. what is the required loan payment? loan payment

Respuesta :

When you have secured an 8% interest, $500,000 bank loan to be paid off in seven equal end-of-year annual payments. $ 3333.3 per month loan payment is required.

What is  amortization?

  • Spreading payments out across several time periods is referred to as amortization in business.
  • The two distinct processes of asset and debt amortization are referred to by the same name.
  • In the latter instance, it alludes to spreading out the expense of an intangible asset across time.
  • There are various amortization techniques, such as declining balance, annuity, bullet, balloon, and negative amortization.

Calcaulation of loan payment:

loan payment = interest rate x loan amount/ duration

= 8% x $500,000/ 12

= $ 3333.3

Hence, $ 3333.3 per month loan payment is required.

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