PDF Amortization Schedules - George Brown College
Amortization Schedules
Creating an Amortization Schedule
Sometimes problems require the construction of an amortization schedule. This is done to determine how much interest is paid on any given repayment of a loan compared to the repayment of the borrowed principal.
Consider the following sample problem:
A debt of $10,000 is amortized by making equal payments at the end of every six months for three years, and interest is 6% compounded semi-annually. Construct an amortization schedule.
Solution: Step 1: Determine the payment value.
First we calculate the value of the payments using known methods, such as the formula for a general ordinary annuity:
PV = PMT 1-(1+ )-
Or, we can use a financial calculator to compute the payment:
Enter the known information as follows:
PV = 10000
P/Y = C/Y = 2
I/Y = 6
Compute the payment. CPT PMT = 1845.975005
FV = 0
N = 6
The answer is rounded to the nearest cent. PMT = $1,845.98
Step 2: Construct the columns and rows of an amortization schedule with the known information. See table below.
Payment Number
0 1 2 3 4 5 6 Total
Payment Amount
0 1,845.98 1,845.98 1,845.98 1,845.98 1,845.98 1,845.98
Interest Paid
0
Principal Paid
0
Remaining Principal
$10,000.00
Tutoring and Learning Centre, George Brown College 2014
georgebrown.ca/tlc
Step 3: Calculate the missing information in each row using the steps below.
Step 3a: Calculate the interest component of the payment (Interest Paid) by multiplying the periodic interest by the remaining principal (from the previous row).
Interest Paid = i * Remaining Principal 0.03 * $10,000= $300
Step 3b: Calculate the Principal Paid by subtracting the Interest Paid from the Payment Amount.
Principal Repaid = Payment Amount ? Interest Paid $1,845.98 ? $300 = $1545.98
Step 3c: Subtract the Principal Paid from the Remaining Principal (in the previous row). Remaining Principal = Remaining Principal (from the previous row) ? Principal Paid
$10,000 ? $1545.98 = $8454.02
Payment Number
0 1 2 3 4 5 6 Total
Payment Amount
0 1,845.98 1,845.98 1,845.98 1,845.98 1,845.98 1,845.98
Interest Paid
0 300 253.62 205.85 156.65 105.97 53.77
Step 4: Adjust the last payment.
Principal Paid
0 1545.98 1592.36 1640.13 1689.33 1740.01 1792.21
Remaining Principal
$10,000.00 8454.02 6861.66 5221.53 3532.20 1792.19 -0.02
It often happens that the remaining principal is not exactly 0 after the last payment. This is because rounding to the nearest penny after each step loses some precision in the answer. To account for this, the Payment Amount and the Principle Paid columns are adjusted to the appropriate amount to make the final balance (Remaining Principal) zero.
In our example, the following changes are made in the last payment row:
6
1,845.96
53.77
1792.19
0
Step 5: Sum the totals for Payment Amount, Interest Paid and Principal Paid.
Payment Number
0 1 ... 6 Total
Payment Amount
0 1,845.98
... 1,845.96 11075.86
Interest Paid
0 300 ... 53.77 1075.86
Tutoring and Learning Centre, George Brown College
2014
Principal Paid
0 1545.98
... 1792.19 10,000
Remaining Principal
$10,000.00 8454.02 ... 0
georgebrown.ca/tlc
................
................
In order to avoid copyright disputes, this page is only a partial summary.
To fulfill the demand for quickly locating and searching documents.
It is intelligent file search solution for home and business.
Related download
- pdf sample problems with suggested solution keystrokes for the hp
- pdf using the ti ba ii calculator for financial calculations
- pdf amortization schedule
- pdf example of amortization schedule for a note with equal total
- pdf using the hp 10b and ti ba ii plus financial calculators
- pdf mortgage amortization lexisnexis
- pdf quick start reference guide timevalue software
- pdf hp 12c loan amortizations amortization the hp12c amortization
- pdf mini lesson loan tables loan amortization and loan payment
- xls financial calculator v 5 1 ccim
Related searches
- bus schedules and rates
- greyhound schedules and fares
- greyhound bus schedules and routes
- trailways bus schedules prices
- greyhound bus schedules and price
- free college textbooks pdf download
- cota bus schedules columbus ohio
- greyhound bus schedules and rates
- greyhound bus schedules routes
- homeschool schedules examples pdf
- clep study guides pdf free college algebra
- cota schedules columbus ohio