Answer:
Principal balance at the end of year 2 = 149,330.9079
Explanation:
Loan Amortization: A loan repayment method structured such that a series of equal periodic installments will be paid for certain number of periods to offset both the loan principal amount and the accrued interest.
We will use the following relationships:
Interest paid = Interest rate × loan balance
Principal paid = Monthly installment - Interest paid
Principal balance= loan balance - principal paid
Year 1
Interest paid = 9.5%/12 × 149,570.75 = 1,184.101
Principal paid in year 1 = 1,303.55 - 1,184.101 = 119.448
Principal balance = 149,570.75 - 119.448= 149,451.3018
Year 2
Interest paid = interest rate × loan balance in year 1 = 1183.156
Interest paid = 9.5%/12 × 149,451.3018
= 1183.156
Principal paid = 1,303.55 - 1183.156139 = 120.393
Principal balance at the end of year 2= Principal balance in year 1 - Principal paid in year 2
= 149,451.3018 - 120.393861 = 149330.9079
Principal balance at the end of year 2 = 149,330.90
