AMORTIZATION - the extinction of loans or debts (according to William L.

Hart)

present amount (P) 40,000.00

P
nominal rate (j) 18.00 % = 0.180000000 R=
1 -( 1
conversion period/year (m) 4
term in years (t) 5.00 yrs. mos.
periodic payment.(R) 3,075.05
40,000.00
R=
1 -( 1

40,000.00
R=
1 -( 1

1,800.0000000000
R=
1 -( 1.045000000

1,800.0000000000
R=
1 - 0.414642860

1,800.0000000000
R=
0.585357140

R ≈ 3,075.05
 C Period Unpaid Balance
O 1 40,000.00
P
j Y 2 38,724.95
( )
m 3 37,392.53
j - m t T 4 36,000.15
+( ) H
m E 5 34,545.11
6 33,024.59
L
0.1800000000 A 7 31,435.66
( )
4 S 8 29,775.21
T
0.1800000000 -( 4 )( 5.000000000 ) 9 28,040.05
+( ))
4 R 10 26,226.81
O 11 24,331.97
W
( 0.0450000000 ) 12 22,351.86
-20.000000000 I 13 20,282.65
+ 0.0450000000 )) N
14 18,120.33
T 15 15,860.69
H
E 16 13,499.38
,800.0000000000 17 11,031.81
T
-20.000000000 A 18 8,453.19
)
B 19 5,758.54
L 20 2,942.63
E
000000
I
F

N
E
C
E
S
S
A
R
Y
Interest Periodic Payment Principal Repaid TOTAL D
1,800.00 3,075.05 1,275.05 Interest 21,500.92 E
L
1,742.62 3,075.05 1,332.42 Periodic Payment (R) 61,500.92 E
1,682.66 3,075.05 1,392.38 Principal Repaid 40,000.00 T
1,620.01 3,075.05 1,455.04 E
1,554.53 3,075.05 1,520.52 U
1,486.11 3,075.05 1,588.94 N
N
1,414.60 3,075.05 1,660.44 E
1,339.88 3,075.05 1,735.16 C
E
1,261.80 3,075.05 1,813.24
S
1,180.21 3,075.05 1,894.84 S
1,094.94 3,075.05 1,980.11 A
R
1,005.83 3,075.05 2,069.21 Y
912.72 3,075.05 2,162.33
R
815.41 3,075.05 2,259.63 O
713.73 3,075.05 2,361.31 W
S
607.47 3,075.05 2,467.57
496.43 3,075.05 2,578.61 O
F
380.39 3,075.05 2,694.65
259.13 3,075.05 2,815.91 D
132.42 3,075.05 2,942.63 A
T
A

I
N

T
H
E

T
A
B
L
E
OUTSTANDING BALANCE (Prospective Method) - used when all the periodic payments are equal and regularly paid

periodic payments (R) 3,075.05

1 -(
nominal rate (j) 0.180000000
OB = R [
conversion period/year (m) 4
number of past payments (k) 2
total number of payments (n) 20
number of payments to be made (k-n) -18
1 -(
OB 37,392.53
OB = 3,075.05 [

1 -(
OB = 3,075.05 [
0.045000

1 -(
OB = 3,075.05 [
0.045000000

1 -
OB = 3,075.05 [
0.045000000

0.547199631
OB = 3,075.05 [ ]
0.045000000

OB = 3,075.05 ( 12.159991803 )

OB ≈ 37,392.53
d regularly paid Interest Paid

j k-n periodic payments (R)

1 + )
m nominal rate (j)
]
j conversion period/year (m)
m number of past payments (k)
total number of payments (n)
0.180000000 ( 2 - 20 ) number of payments to be made (k-n)
1 + )
4 I(n-k)
]
0.180000000
4 Principal Repaid
periodic payments (R)
-18 I(n-k)
1 + 0.045000000 )
] Prepaid = R - I(n-k)
0.045000000

-18
1.045000000 )
]
0.045000000

0.452800369
]
0.045000000
Paid j k-
I(n-k) = R [ 1 -( 1 + )
m
3,075.05
0.180000000 0.180000000 ( 2-
I(n-k) = 3,075.05 [ 1 -( 1 + )
4 4
2
20 -18
I(n-k) = 3,075.05 [ 1 -( 1 + 0.045000000 ) ]
-18
1,682.66
-18
I(n-k) = 3,075.05 [ 1 - ( 1.045000000 ) ]
Repaid
3,075.05
1,682.66 I(n-k) = 3,075.05 [ 1 - 0.452800369 )
1,392.38
I(n-k) = 3,075.05 ( 0.547199631 )

I(n-k) = 1,682.66
n OUTSTANDING BALANCE (Retrospective Method) - used when the final payment is not the same as the regular peri
]

present amount (P) 40,000.00

20 ) periodic payments (R) 3,075.05
] OB = P (
nominal rate (j) 0.1800000000
conversion period/year (m) 4
number of past payments (k) 2
total number of payments (n) 20
number of payments to be made (k-n) -18
OB = 40,000.00 (
OB 12,739.18

OB = 40,000.00 (

OB = 40,000.00 (

OB = 40,000.00 (

OB = 43,681.000000000 -

OB = 43,681.000000000 -

OB ≈ 12,739.18
ot the same as the regular periodic payments

j k
k ( 1 + )
j m
1 + ) - R [
m j
m

0.1800000000 ( 2
2 ( 1 + )
4
1 + 0.1800000000 ) - 3,075.05 [
4 0.1800000000
4

-18
2 ( 1 + 0.0450000000 )
1 + 0.0450000000 ) - 3,075.05 [
0.0450000000

-18
2 1.0450000000
1.0450000000 ) - 3,075.05 [ ]
0.0450000000

0.4528003688
1.092025000 )- 3,075.05 [ ]
0.0450000000

3,075.05 ( 10.062230419 )

30,941.819115972
-n

- 20 )

]
AMORTIZATION - the extinction of loans or debts (according to William L. Hart)

present amount (P) 40,000.00

R=
periodic rate (i) 18.00 %= 0.1800000000 1 -(

total number of conversion periods (n) 20

periodic payment.(R) 7,472.80 (
R=
1 -(

7,200.00000
R=
1 -(

7,200.000000000
R=
1 -

7,200.000000000
R=
0.963494369

R ≈ 7,472.80
 C Period Unpaid Balance Interest
O 1 40,000.00 7,200.00
P
P ( i ) Y 2 39,727.20 7,150.90
-n 3 39,405.30 7,092.95
1 + i ) T 4 39,025.45 7,024.58
H
E 5 38,577.23 6,943.90
40,000.00 )( 0.1800000000 ) 6 38,048.34 6,848.70
L
- 20 A 7 37,424.24 6,736.36
1 + 0.1800000000 )
S 8 36,687.80 6,603.80
T
9 35,818.81 6,447.39
7,200.000000000 R 10 34,793.39 6,262.81
-20 O 11 33,583.40 6,045.01
1.1800000000 ) W
12 32,155.62 5,788.01
I
N 13 30,470.83 5,484.75
7,200.000000000 14 28,482.78 5,126.90
0.036505631 T 15 26,136.88 4,704.64
H
E 16 23,368.72 4,206.37
7,200.000000000 17 20,102.29 3,618.41
0.963494369 T 18 16,247.91 2,924.62
A
B 19 11,699.73 2,105.95
7,472.80 L 20 6,332.88 1,139.92
E

I
F

N
E
C
E
S
S
A
R
Y
Periodic Payment Principal Repaid TOTAL D
7,472.80 272.80 Interest 109,455.98 E
L
7,472.80 321.90 Periodic Payment (R) 149,455.98 E
7,472.80 379.85 Principal Repaid 40,000.00 T
7,472.80 448.22 E
7,472.80 528.90 U
7,472.80 624.10 N
N
7,472.80 736.44 E
7,472.80 868.99 C
E
7,472.80 1,025.41
S
7,472.80 1,209.99 S
7,472.80 1,427.79 A
R
7,472.80 1,684.79 Y
7,472.80 1,988.05 R
7,472.80 2,345.90 O
7,472.80 2,768.16 W
S
7,472.80 3,266.43
7,472.80 3,854.39 O
7,472.80 4,548.18 F
7,472.80 5,366.85 D
7,472.80 6,332.88 A
T
A

I
N

T
H
E

T
A
B
L
E
OUTSTANDING BALANCE (Prospective Method) - used when all the periodic payments are equal and regularly paid

periodic payments (R) 7,472.80

periodic rate (i) 0.180000000 OB = R [
number of past payments (k) 2
total number of payments (n) 20
number of payments to be made (k-n) -18
OB 39,405.30 OB = 7,472.80 [

OB = 7,472.80 [

OB = 7,472.80 [

OB = 7,472.80 [

OB = 7,472.80 (

OB = 39,405.30
ts are equal and regularly paid

k-n
1 -( 1 + i )
]
i

( 2 - 20 )
1 -( 1 + 0.180000000 )
]
0.1800000000

-18
1 - ( 1.1800000000 )
]
0.1800000000

1 - 0.050830440
]
0.1800000000

0.949169560
]
0.180000000

5.273164223 )
 Interest Paid
I(n-k) = R [

periodic payments (R) 7,472.80

periodic rate (i) 0.180000000
I(n-k) = 7,472.80 [
number of past payments (k) 2
total number of payments (n) 20
number of payments to be made (k-n) -18
I(n-k) = 7,472.80 [
I(n-k) 7,092.95

Principal Repaid I(n-k) = 7,472.80 [

periodic payments (R) 7,472.80
I(n-k) 7,092.95 I(n-k) = 7,472.80 (
Prepaid = R - I(n-k) 379.85
I(n-k) = 7,092.95
 k-n
1 -( 1 + i ) ]

( 2 - 20 )
1 -( 1 + 0.180000000 ) ]

-18
1 - ( 1.180000000 ) ]

1 - 0.050830440 )

0.949169560 )
OUTSTANDING BALANCE (Retrospective Method) - used when the final payment is not the same as the regular periodic payme

present amount (P) 40,000.00

periodic payments (R) 7,472.80 OB = P (
periodic rate (i) 0.1800000000
number of past payments (k) 2
total number of payments (n) 20
number of payments to be made (k-n) -18 OB = 40000.00 (
OB 53,585.75

OB = 40000.00 (

OB = 40000.00 (

OB = 55,696.000000000 -

OB = 55,696.000000000 -

OB ≈ 53,585.75
the same as the regular periodic payments

k ( 1 + i )
1 + i ) - R [
i

2 ( 1 + 0.1800000000 )
1 + 0.1800000000 ) - 7,472.80 [
0.1800000000

2 -18
1.1800000000
1.1800000000 ) - 7,472.80 [ ]
0.1800000000

0.0508304399
1.3924000000 )- 7,472.80 ( )
0.1800000000

7,472.80 ( 0.2823913330 )

2,110.253740626
 k - n
]
i

( 2 - 20 )
]
1800000000
OUTSTANDING BALANCE (Prospective Method) - used when all the periodic payments are equal and regularly paid

periodic payments (R) 3,075.05

nominal rate (j) 18.00 % = 0.180000000 OB = R [

conversion period/year (m) 4

number of past payments (k) 2
total number of payments (n) 20
number of payments to be made (k-n) -18
OB = 3,075.05 [
OB 37,392.58

OB = 3,075.05 [

OB = 3,075.05 [

OB = 3,075.05 [

OB = 3,075.05 [

OB = 3,075.05 (

OB ≈ 37,392.58
regularly paid

j k-n
1 -( 1 + )
m
]
j
m

0.180000000 ( 2 - 20 )
1 -( 1 + )
4
]
0.180000000
4

-18
1 -( 1 + 0.045000000 )
]
0.045000000

-18
1 - ( 1.045000000 )
]
0.045000000

1 - 0.452800369
]
0.045000000

0.547199631
]
0.045000000

12.159991803 )

58
 Interest Paid
I(n-k) = R [ 1 -(

periodic payments (R) 3,075.05

nominal rate (j) 0.1800000000
I(n-k) = 3,075.05 [ 1 -(
conversion period/year (m) 4
number of past payments (k) 2
total number of payments (n) 20
I(n-k) = 3,075.05 [ 1 -(
number of payments to be made (k-n) -18
I(n-k) 1,682.67

I(n-k) = 3,075.05 [ 1 -(
Principal Repaid
periodic payments (R) 3,075.05
I(n-k) 1,682.67 I(n-k) = 3,075.05 [ 1 -
Prepaid = R - I(n-k) 1,392.38
I(n-k) = 3,075.05 ( 0.547199631 )

I(n-k) = 1,682.67
 j k-n
1 + ) ]
m

0.180000000 ( 2 - 20 )
1 + ) ]
4

-18
1 + 0.045000000 ) ]

-18
1.045000000 ) ]

0.452800369 )
OUTSTANDING BALANCE (Prospective Method) - used when all the periodic payments are equal and regularly paid

periodic payments (R) 3,075.05

OB =
periodic rate (i) 18.00 %= 0.180000000

number of past payments (k) 2

total number of payments (n) 20
number of payments to be made (k-n) -18 OB =
OB 16,215.24

OB =

OB =

OB =

OB =

OB =
nts are equal and regularly paid

k-n
1 -( 1 + i )
R [ ]
i

( 2 - 20 )
1 -( 1 + 0.180000000 )
3,075.05 [ ]
0.1800000000

-18
1 - ( 1.1800000000 )
3,075.05 [ ]
0.1800000000

1 - 0.050830440
3,075.05 [ ]
0.1800000000

0.949169560
3,075.05 [ ]
0.180000000

3,075.05 ( 5.273164223 )

16,215.24
 Interest Paid
I(n-k) = R [

periodic payments (R) 3,075.05

periodic rate (i) 0.180000000
I(n-k) = 3,075.05 [
number of past payments (k) 2
total number of payments (n) 20
number of payments to be made (k-n) -18
I(n-k) = 3,075.05 [
I(n-k) 2,918.74

Principal Repaid I(n-k) = 3,075.05 [

periodic payments (R) 3,075.05
I(n-k) 2,918.74 I(n-k) = 3,075.05 (
Prepaid = R - I(n-k) 156.31
I(n-k) = 2,918.74
 k - n
1 -( 1 + i ) ]

( 2 - 20 )
1 -( 1 + 0.180000000 ) ]

-18
1 - ( 1.180000000 ) ]

1 - 0.050830440 )

0.949169560 )
OUTSTANDING BALANCE (Retrospective Method) - used when the final payment is not the same as the regular periodic payme

present amount (P) 40,000.00

periodic payments (R) 3,075.05 OB =

periodic rate (i) 18.00 %= 0.1800000000

number of past payments (k) 2

total number of payments (n) 20 OB =
number of payments to be made (k-n) -18
OB 54,827.63

OB =

OB =

OB =

OB =

OB ≈
not the same as the regular periodic payments

k ( 1 +
P ( 1 + i ) - R [
i

2 ( 1 +
40000.00 ( 1 + 0.1800000000 ) - 3,075.05 [
0.1800000

2 -18
1.1800000000
40000.00 ( 1.1800000000 ) - 3,075.05 [ ]
0.1800000000

0.0508304399
40000.00 ( 1.3924000000 )- 3,075.05 ( )
0.1800000000

55,696.000000000 - 3,075.05 ( 0.2823913330 )

55,696.000000000 - 868.367468402

54,827.63
 OUTSTANDING BALANCE (Retrospective Method) - used when the final payment is not

k - n present amount (P) 40,000.00

i )
] periodic payments (R) 3,075.05
i
nominal rate (j) 18.00 %=

( 2 - 20 ) conversion period/year (m) 4

0.1800000000 )
] number of past payments (k) 2
0.1800000000 total number of payments (n) 20
number of payments to be made (k-n) -18
OB 12,739.14
sed when the final payment is not the same as the regular periodic payments

0
k
j
OB = P ( 1 + )
m
0.1800000000

2
0.1800000000
OB = 40,000.00 ( 1 + )
4
12,739.14

2
OB = 40,000.00 ( 1 + 0.0450000000 )

2
OB = 40,000.00 ( 1.0450000000 ) - 3,075.05

0.4528003688
OB = 40,000.00 ( 1.092025000 )- 3,075.05 [
0.0450000000

OB = 43,681.000000000 - 3,075.05 ( 10.062230419 )

OB = 43,681.000000000 - 30,941.861649403

OB ≈ 12,739.14
 j k-n
( 1 + )
m
- R [ ]
j
m

0.1800000000 ( 2 - 20 )
( 1 + )
4
- 3,075.05 [ ]
0.1800000000
4

-18
( 1 + 0.0450000000 )
- 3,075.05 [ ]
0.0450000000

-18
1.0450000000
[ ]
0.0450000000