TOC
4.1 Amortization
Instructions: Use the following tutorial to help
introduce or reinforce the concept of Amortization.
Read through the introduction, then study and familiarize
yourself with the definitions of terms. Next, use
the incremental calculator to study each step of
the process of determining Amortization.
Finally,
use the calculator for examples to quiz yourself.
An amortization is a
sequence of equal payments made at regular time intervals to
pay off a loan (principal plus interest
charges) by a certain time. The time period in which
these payments are made is called the term
.
An example of a loan which would be amortized is a house loan.
The mortgagor who must pay the lender back the amount of money
borrowed plus a given rate of interest of that loan within a
certain time period.
The following is the formula for the amortization:
R = (Pi) / (1-(1+i)-n)
Definitions
Incremental Calculator
Calculator
TOC