I am stuck in this question. "amortization payments"
What amortization payments would be required every 6 months, at 14% interest, to off a $35,000 loan within 4 yrs.
Since u are good at explaining, please do so.
What is the periodic payment required to retire a debt of P dollars in n periods (months or years) if payments start at the end of the first period and bear I% interest compounded periodically?
For this typical loan payment calculation, R = Pi/[1 - (1 +i)^(-n)] where R = the periodic payment, P = the amount borrowed, n = the number of payment periods, and i = I/100.
Example: What is the annual payment required to retire a loan of $10,000 over a period of 5 years at an annual interest rate of 8%? Here, P = 10,000, n = 5, and i = .08 resulting in
R = 10000(.08)/[1 - (1.08)^-5] = $2504.56 per year
The total amount paid back becomes 5(2504.56) = $12,522.82 meaning that the use of the money cost the borrower $2,522.82. It is worthy of note that most loans are paid on a monthly basis. The significance of this to the borrower is that he is paying the money back more often, thus reducing the outstanding balance more rapidly. The effect of this is to reduce the total amount paid for the use of the money. Here, P = 10,000, n = 60, and i = .006666 resulting in
R = 10000(.006666)/[1.006666)^-60] = $202.76 per month.
The total amount paid back becomes 202.76(60) = $12,165.60, a saving of $357.22 by paying monthly
This should give you enough information to solve your problem.
I still don't get it,need your help
You might want to go to Wikipedia and check the entry: Amortization calculator.
This is one of those formulas I don't keep at my fingertips. If you have any questions on it please post them.
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