ARELLANO UNIVERSITY

Jose Abad Santos Campus

Basic Education Department – Senior High School
3058 Taft Avenue Pasay

Name: CRISILO A. LAGAHAN Date: Jan. 8, 2021

Grade/Track/Section: 12 ABM1 Room No: ______________

Activity # 1

Activity Title: Loan Amortization Schedule

Learning Target: Compute the loan amortization using mathematical concepts and the present value tables.
Reference Title: Module in Business Finance
Author(s): Prof. Gerald Ocan
Type of Activity: Concept notes, classroom discussion, collaborative exercises

Loan Amortization Schedule is a schedule that shows the annual interest expense, the reduction of
principal each year, and the ending balance or remaining principal of amortized loan.

PVA = PMT 1 – [ 1 / ( 1 + r )^n ]

r
Where:
PVA = Present value of annuity
PMT = Payment
r = Interest
n = Time Period

Example: Mr. Gemao this time applied for a P20,000 cash loan at .25 interest per month payable for 6 months.
Prepared an amortization table.

PVA = PMT 1 – [ 1 / ( 1 + r )^n ]

r
20,000 = PMT 1 – [ 1 / ( 1 + .25 )^6 ]
.25
20,000 = PMT 1 – [ 1 / ( 1.25 )^6 ]
.25
20,000 = PMT 1 – [ 1 / 3.8147 ]
.25
20,000 = PMT 1 – 0.2621
.25
20,000 = PMT .7379
.25
20,000 = PMT 2.9516
2.9516
6775.9859 = PMT

So 6775.9859 is the monthly payment for the loan of Mr. Gemao. We can now proceed to the loan
amortization table.
 ARELLANO UNIVERSITY
Jose Abad Santos Campus
Basic Education Department – Senior High School
3058 Taft Avenue Pasay

Number of Beginning Annual/Monthly Interest Principal Remaining

Month / Year Balance Payment Reduction Balance
1 20,000 6775.9859 5,000 1,775.9859 18,224.0141
2 18,224.0141 6775.9859 4,556.0035 2,219.9824 16,004.0317
3 16,004.0317 6775.9859 4,001.0079 2,774.9777 13,229.054
4 13,229.054 6775.9859 3,307.2635 3,468.7224 9,760.3316
5 9,760.3316 6775.9859 2,440.0829 4,335.903 5,424.4286
6 5,424.4286 6775.9859 1,356.1071 5,419.8788 4.5498

Exercise: Create the amortization table for this loan.

1. You are borrowing P10,000 payable for 3 years at 11% interest rate.

PVA = PMT 1 – [ 1 / ( 1 + r )^n ]

r

10,000 = PMT 1 – [ 1 / ( 1 + .11 )^3 ]

.11

10,000 = PMT 1 – [ 1 / ( 1.11 )^3 ]

.11

10,000 = PMT 1 – [ 1 / 1.36731 ]

.11

10,000 = PMT 1 – 1.7312

.11

10,000 = PMT .2688

.11

10,000 = PMT 2.4436

.11

4092.3228= PMT