Executive Summary.edited

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Running head: EXECUTIVE SUMMARY 1

Executive Summary

Student’s Name

Institutional Affiliation

EXECUTIVE SUMMARY 2

Executive Summary

In operating a business, borrowing is invertible especially in financing capital-intensive

assets, such as procurement of equipment. In banking, a loan is defined as a sum of cash

borrowed and expected to be paid back with a negotiated interest; thus, paid a sum of principal

amount borrowed plus the interest say at 5 % per annum. Loan amortization is a tool used in

illustrating a loan payment in a reducing balance method. As defined by Rambaud, Martínez, and

Segura (2018) loan amortization illustrates a list of each regular payment over time depicting the

loan payment amount, interest payable and the principal payment on a reducing balance.

Following the loan borrowed by your company amount to $15,000 at 14% annual rate of interest

payable annually for three years, the company is expected to repay a total of $ 6,461 USD every

year for the next 3 years. This includes interest payable every year's amount to $2,100, $1,489

and $793 in years 1, 2 and 3 respectively (See Appendix Table 1).

Moreover, the company will pay a principal payment of $4,361, $ 4,972 and $ 5,668

yearly for the next three-year respectively an amount that will be deducted from the beginning

balance to determine the ending balance (See Appendix Table 1). Notably, since the loan follows

a reducing balance, the ending amount will reduce to zero by the end of the loan repayment

period.

Explanation why the Interest paid decline over the Years

Use of reducing balance method in the loan repayment is the primary reason why the

interest paid decline over the years. Reducing balance in loan repayment implies that the amount

of interest payable is determined using the outstanding loan balance. This forms the primary

reason why the interest paid declines as the outstanding amount reduces as illustrated on the loan

amortization schedule (See appendix table 1). Indeed, at a rate of 14% p.a for three years, the

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Running head: EXECUTIVE SUMMARY Executive Summary Student’s Name Institutional Affiliation 1 EXECUTIVE SUMMARY 2 Executive Summary In operating a business, borrowing is invertible especially in financing capital-intensive assets, such as procurement of equipment. In banking, a loan is defined as a sum of cash borrowed and expected to be paid back with a negotiated interest; thus, paid a sum of principal amount borrowed plus the interest say at 5 % per annum. Loan amortization is a tool used in illustrating a loan payment in a reducing balance method. As defined by Rambaud, Martínez, and Segura (2018) loan amortization illustrates a list of each regular payment over time depicting the loan payment amount, interest payable and the principal payment on a reducing balance. Following the loan borrowed by your company amount to $15,000 at 14% annual rate of interest payable annually for three years, the company is expected to repay a total of $ 6,461 USD every year for the next 3 years. This includes interest payable every year's amount to $2,100, $1,489 and $793 in years 1, 2 and 3 respectively (See Appendix Table 1). Moreover, the company will pay a principal payment of $4,361, $ 4,972 and $ 5,668 yearly for the next three-year respectively an amount that will be deducted from the beginning balance to determine the ending balance (See Appendix Table 1). Notably, since the loan follows a reducing balance, the ending amount will reduce to zero by the end of the loan repaym ...
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Tags: discussion loan payment