Amortization

Amortization
• The process of paying a loan and its interest through
series of regular equal payments.

Amortized loan
• Loan to be paid using the amortization scheme.
Formula for finding Payments on an
Amortized loan

[ ( ) ]
𝑛𝑡
𝑟
𝑟 𝑃 1+
𝑛
𝑅=

[( ) ]
𝑛𝑡
𝑟
𝑛 1+ −1
𝑛
Example:
• An amortized housing loan of ₱2,000,000 for
purchasing a brand new house is granted to Mr. Teves
by a bank. The loan is to be paid for 20 years at an
annual interest rate of 12%.

A. If payments were made quarterly, what is the

quarterly amortization of the housing loan ?
B. What is the interest paid by Mr. Teves at his first
payment or the first quarterly payment?