AMORTIZATION

AMORTIZATION
• Is any method of repaying debt, principal and interest included, usually by a
series of equal payments at equal interval
Period Outstanding Interest due at Payment Principal repaid
Principal at the the end of at end of period
beginning of period
period

1 P1 P1i A A-P1i
2 P1-(A-Pi) P2(i) A A-P2i
3 P2-(A-P2i) P3(i) A A-P3i
 AMORTIZATION
• Construct an amortization schedule for a Php 1,000, 10% annual rate loan
with 3 equal annual payments.

Period P I A R
1 1000 100 402.12 302.12
2 697.88 69.79 402.12 332.33
3 365.55 36.55 402.12 365.57
• Mr. Reyes borrows P60,000 at 12% compounded annually, agreeing to repay
the loan in 15 equal payments. How much of the original principal is still
unpaid after he has made the 8th payment?
 Period Principal I A R
1 60000 7200 8810.57 1610.57
2 58389.43 7006.73 8810.57 1803.84
3 56585.59 6790.27 8810.57 2020.3
4 54565.29 6547.83 8810.57 2262.74
5 52302.55 6276.06 8810.57 2534.26
6 49768.29 5972.19 8810.57 2838.38
7 46929.91 5631.59 8810.57 3178.98
8 43750.93 5250.11 8810.57 3560.46
9 40190.47 4822.86 8810.57 3987.71