Prepare an amortization schedule for a three-year loan of $99,000. The interest rate is 10 percent per year, and the loan agreement calls for a principal reduction of $33,000 every year. How much total interest is paid over the life of the loan?

Note: Leave no cells blank. Enter '0' where necessary. Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.

We can prepare the amortization schedule and compute the total interest paid for the loan based on the given parameters. Here's a step-by-step breakdown:

### Loan Details:
- Loan amount = $99,000
- Interest rate = 10% per year
- Principal reduction = $33,000 per year
- Term = 3 years

### Step-by-step Plan:
1. Calculate the interest for each year based on the outstanding loan balance at the start of the year.
2. Reduce the principal by $33,000 each year.
3. Compute the total interest paid over the life of the loan.

### Amortization Schedule:

We start by calculating the interest and principal payments for each year.

#### Year 1:
- Initial balance = $99,000
- Interest for Year 1 = 10% of $99,000 = $ 99,000 \times 0.10 = 9,900 $
- Principal reduction = $33,000
- End of year balance = $ 99,000 - 33,000 = 66,000 $

#### Year 2:
- Initial balance = $66,000
- Interest for Year 2 = 10% of $66,000 = $ 66,000 \times 0.10 = 6,600 $
- Principal reduction = $33,000
- End of year balance = $ 66,000 - 33,000 = 33,000 $

#### Year 3:
- Initial balance = $33,000
- Interest for Year 3 = 10% of $33,000 = $ 33,000 \times 0.10 = 3,300 $
- Principal reduction = $33,000
- End of year balance = $ 33,000 - 33,000 = 0 $

### Total Interest Paid:
Now, we sum the interest payments from all three years:
- Total interest paid = $ 9,900 + 6,600 + 3,300 = 19,800 $

### Amortization Table:

| Year | Beginning Balance | Principal Payment | Interest Payment | Total Payment | Ending Balance |
|------|-------------------|-------------------|------------------|---------------|----------------|
| 1    | 99,000            | 33,000            | 9,900            | 42,900        | 66,000         |
| 2    | 66,000            | 33,000            | 6,600            | 39,600        | 33,000         |
| 3    | 33,000            | 33,000            | 3,300            | 36,300        | 0              |

### Final Result:
- **Total interest paid over the life of the loan** = $19,800.

Would you like more details on any specific part of the calculation?

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Here are 5 related questions:
1. How does the interest payment change if the interest rate is increased to 12%?
2. What would the amortization schedule look like for a 5-year loan term with the same principal and interest rate?
3. How is the total interest affected if the principal reduction is $22,000 per year instead of $33,000?
4. What is the impact on the total loan payment if the interest is compounded monthly instead of annually?
5. How would an additional annual payment of $10,000 toward the principal affect the schedule?

**Tip:** A lower interest rate reduces the total interest paid over the loan's life, while a shorter term increases the annual payments but reduces total interest.

Prepare an amortization schedule for a three-year loan of $99,000. The interest rate is 10 percent per year, and the loan agreement calls for a principal reduction of $33,000 every year. How much total interest is paid over the life of the loan?

Discover how to prepare an amortization schedule for a $99,000 loan with a 10% annual interest rate and $33,000 principal reduction each year. This step-by-step guide includes interest calculations, total payment, and a detailed amortization table over three years. Suitable for high school students and financial learners.

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