D11 Amortization Schedule Pt 1 Flashcards
what is anything extra paid to the loan called?
principal payment or P_t. PMT - Interest paid = prin pmt.
Ex. 1243.43 - (500 - 124.34) = 1243.43 - 375.66 = 867.77
The extra paid, 375.66, is call the principal payment.
how do you find the interest due after one year.
PV or Price * i.
Ex. PV = 1243.43, i = 10%
PV * i = 124.34 is the amt of int due after one year.
In theory you subtract this from the loan pmt to the get the prin paid. then subtract the prin paid from the PV of the loan for the OB_1. Then repeat this until the loan is paid off
what is the eqn for interest paid?
previous loan balance * interest rate
or
OB_t-1 * i
what is the retrospective method and it’s eqn
outstanding balance is accumulated value of original loan minus accumulated value of previous loan payments
Eqn: OB_t = Original loan amount (L) * (1+i)^t - accum value of any loan pmts. (R s angle t i).
or L(1+i)^t - R*s angle t i
what is the prospective method and its eqn?
outstanding balance is present
value of future loan payments
eqn: OB_t = R*a angle n-t i
what is I_t and its eqns?
amt of int in R_t.
I_t = OB_t-1 * i_t
what do R_t, I_t, P_t and OB_t, L mean?
R_t = loan payment at time t
I_t = amount of interest in Rt
P_t = amount of principal in Rt
OB_t = outstanding balance after payment t or balance left on loan at t
L = original loan amount = OB_0
what is the Amortization Worksheet and what does it consist of?
It’s a table consisting of Loan Payments, Interest Paid, Principal Paid and Loan Balance for each respective pmt period until the loan balance is 0.
how to do you find the principal or interest paid between or during payment periods?
2ND AMORT and set P1 and P2 to the periods you want.
what does principal repaid mean?
the amount of balance on the loan immediately following a certain payment or the remaing OB
Ex. In a 10 year loan with annual pmts, the principal repaid in the final 4 payments must equal the OB after the 6th pmt.
