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Prepare an amortization schedule for a three-year loan of $57,000. The interest rate is 8 percent per year, and the loan calls for equal annual payments. How much interest is paid in the third year? How much total interest is paid over the life of the loan?

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michell96

To repay this loan in three years we must make annual payments of $23,560.

How to calculate how much we should pay annually?

To calculate the payments that we must make each year, taking into account the 8% interest, we must carry out the following operations:

  • $57,000 ÷ 3 = 19,000

To calculate the interest equivalent to 8%:

  • $57,000 ÷ 100 = $570
  • $570 × 8% = $4,560

So, to calculate the total per year that we must pay, we must add both values:

  • $19,000 + $4,560 = $23,560

Finally, to know how much we pay in total for the interest on the loan, we multiply the value of the interest by the years that the loan lasted:

$4,560 × 3 = $13,680

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