14 - 1

Amortization
Amortization

ofLoans
Loans
of

Chapter
14

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of

Amortization
Amortization

ofLoans
Loans
of

McGraw-Hill Ryerson

14 - 2

A$9,500
$9,500 personal
personal loan
loan at
at 10.5%
10.5% compounded
compounded
A
monthly isis to
to be
be repaid
repaid over
overaa 4-year
4-yearterm
term
monthly
by equal
equal monthly
monthly payments.
payments.
by
A. Calculate
Calculate the
the interest
interest and
and principal
principal components
components
A.
of the
the 29th
29th payment.
payment. B.
B. How
How much
much interest
interest will
will
of
be paid
paid in
in the
the second
second year
year of
of the
the loan?
loan?
be
First: find the size of the monthly payment
PV = 9500
n = 12(4) = 48 i = .105/12

Amortization
Amortization

ofLoans
Loans
of

McGraw-Hill Ryerson

14 - 3

A$9,500
$9,500 personal
personal loan
loan at
at 10.5%
10.5% compounded
compounded
A
monthly isis to
to be
be repaid
repaid over
overaa 4-year
4-yearterm
term
monthly
by equal
equal monthly
monthly payments.
payments.
by
A. Calculate
Calculate the
the interest
interest and
and principal
principal components
components
A.
of the
the 29th
29th payment.
payment.
of
First: find the balance after the 28 payments

Amortization
Amortization

14 - 4

A$9,500
$9,500 personal
personal loan
loan at
at 10.5%
10.5% compounded
compounded
A
ofLoans
Loans
monthly isis to
to be
be repaid
repaid over
overaa 4-year
4-yearterm
term
of
monthly
by equal
equal monthly
monthly payments.
payments.
by
B. How
How much
much interest
interest will
will be
be paid
paid in
in the
the
B.
second year
year of
of the
the loan?
loan?
second
First: find the balance after 1 Year, and the balance after 2 Years

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