Loan Amortization Schedule

1. A firm borrows Rs. 100,000 at an interest rate of 15% and the loan repaid in 5 equal
installments payable at the end of each of the next 5 years. Calculate annual installments
and prepare an amortization schedule.
Loan Amount 100000        
Installments Annually        
Rate 15.00%        
EMI ₹ -29,831.56        
           
           
Years Opening Balance Annual Instalments Interest (@15%) Principle Closing Balance
1 100000 ₹ -29,831.56 ₹ -15,000.00 ₹ -14,831.56 ₹ 85,168.44
2 ₹ 85,168.44 ₹ -29,831.56 ₹ -12,775.27 ₹ -17,056.29 ₹ 68,112.16
3 ₹ 68,112.16 ₹ -29,831.56 ₹ -10,216.82 ₹ -19,614.73 ₹ 48,497.42
4 ₹ 48,497.42 ₹ -29,831.56 ₹ -7,274.61 ₹ -22,556.94 ₹ 25,940.48
5 ₹ 25,940.48 ₹ -29,831.56 ₹ -3,891.07 ₹ -25,940.48 ₹ 0.00

2. Shyam borrows Rs. 80,000 for a musical system at a monthly interest of 1.25%. the loan
is to be repaid in 12 equal monthly instalments. Payable at the end of each month.
Prepare the loan amortization schedule.

Loan Amount 80000        

Instalments Monthly        
Rate 1.25%        
EMI ₹ -7,220.66        
           
           
Opening Interest Closing
Months Balance EMI (@1.25%) Principle Balance
1 80000 ₹ -7,220.66 ₹ -1,000.00 ₹ -6,220.66 ₹ 73,779.34
2 ₹ 73,779.34 ₹ -7,220.66 ₹ -922.24 ₹ -6,298.42 ₹ 67,480.91
3 ₹ 67,480.91 ₹ -7,220.66 ₹ -843.51 ₹ -6,377.15 ₹ 61,103.76
4 ₹ 61,103.76 ₹ -7,220.66 ₹ -763.80 ₹ -6,456.87 ₹ 54,646.89
5 ₹ 54,646.89 ₹ -7,220.66 ₹ -683.09 ₹ -6,537.58 ₹ 48,109.31
6 ₹ 48,109.31 ₹ -7,220.66 ₹ -601.37 ₹ -6,619.30 ₹ 41,490.01
7 ₹ 41,490.01 ₹ -7,220.66 ₹ -518.63 ₹ -6,702.04 ₹ 34,787.97
8 ₹ 34,787.97 ₹ -7,220.66 ₹ -434.85 ₹ -6,785.82 ₹ 28,002.16
9 ₹ 28,002.16 ₹ -7,220.66 ₹ -350.03 ₹ -6,870.64 ₹ 21,131.52
10 ₹ 21,131.52 ₹ -7,220.66 ₹ -264.14 ₹ -6,956.52 ₹ 14,175.00
11 ₹ 14,175.00 ₹ -7,220.66 ₹ -177.19 ₹ -7,043.48 ₹ 7,131.52
12 ₹ 7,131.52 ₹ -7,220.66 ₹ -89.14 ₹ -7,131.52 ₹ -0.00

3. Phoenix company borrows Rs. 5,00,000 at an interest rate of 14%. The loan is to be
repaid in 4 equal installments payable at the end of each of the next 4 years, prepare the
loan amortization schedule.
Loan Amount 500000        
Installments Annually        
Rate 14.00%        
EMI ₹ -1,71,602.39        
           
           
Years Opening Balance Annual Instalments Interest (@14%) Principle Closing Balance
1 500000 ₹ -1,71,602.39 ₹ -70,000.00 ₹ -1,01,602.39 ₹ 3,98,397.61
2 ₹ 3,98,397.61 ₹ -1,71,602.39 ₹ -55,775.67 ₹ -1,15,826.73 ₹ 2,82,570.88
3 ₹ 2,82,570.88 ₹ -1,71,602.39 ₹ -39,559.92 ₹ -1,32,042.47 ₹ 1,50,528.41
4 ₹ 1,50,528.41 ₹ -1,71,602.39 ₹ -21,073.98 ₹ -1,50,528.41 ₹ 0.00

Present Value of Perpetuity

4. Calculate the present value of Rs. 2,000 received in perpetuity for an infinite period
taking the discount rate of 10%.

C
P.V. of Perpetuity = i
C= Cash Flow Stream or Annuity
i = Interest Rate of Discount Rate

5. As an investor you require Rs. 1,00,000 rent per annum and the discount rate is 8% then
the maximum amount you should pay for a house?

6. If the interest rate is 12% how much investment is required now to yield an income of
Rs. 12,000 per year from the beginning of the 10th year and continuing thereafter forever?
 Present Value of Growing Perpetuity
7. An office complex is expected to generate a net rental of Rs. 3 Million next year, which
is expected to increase by 5% every year. If the discount rate is 10% calculate the Present
Value of the rental stream.

C
P.V. of Growing Perpetuity = (i−g)
C= Cash Flow Stream or Annuity
i = Interest Rate of Discount Rate
g= Growth Rate

8. Pipe India owns an oil pipeline that will generate Rs. 12 crores of cash income in the
coming year. It has a very long life with virtually negligible operating costs. The volume
of oil shipped, however, will increase over time and, hence cash will increase by 3% per
year. the discount rate is 12%.
a. If the pipeline is used forever, what is the present value of its cash flows?
b. If the volume of oil shipped, however, will decline over time and, hence cash will
decrease by 3% per year. And the volume of the pipeline is used forever, what is the
present value of its cash flows?
 Present Value of a Growing Annuity

Present Value of Growing Annuity = A (1+g) x ¿

i= Interest Rate or Discount rate
n = Number of period or time or maturity
A = Annuity
g = growth rate

9. Suppose you have the right to harvest a teak plantation for the next 20 years over which
you expect to get 100,000 cubic feet of teak per year. The current price per cubic feet of
teak is Rs. 500, but it is expected to increase at a rate of 8% per year. The discount rate is
15%. Find the present value of the teak that you can harvest from the teak forest.

10. You are negotiating with the government the right to mine 100,000 tons of iron ore per
year for 15 years. The current price per ton of iron is Rs. 3,000, but it is expected to
increase at a rate of 6% per year. What is the present value of the iron ore that you can
mine if the discount rate is 16%?