Posted by Katelyn on Tuesday, December 11, 2012 at 10:11pm.
The formula for calculating the payment amount is shown below.
A = P * ((r(1+r)^n)/(((1+r)^n)-1)
Simple Amortization Calculation Formula
where
A = payment Amount per period
P = initial Principal (loan amount)
r = interest rate per period
n = total number of payments or periods
A = 15000 * ((0.055(1.055)^12)/(((1.055)^12) - 1)
A = 15000 * ((0.055*1.9012)/.9012)
A = 1,740.44
Year 1, first payment: $1740.44 Interest paid = balance * 0.055 = $15000*.055 = $825
Principal paid = payment - interest = $ 1740.44 - 825 = 915.00
Balance = 15000 - 915 = 14085
Year 1, 2nd payment: $1740.44
Interest paid = balance * 0.055 = $14085*.055 = $774.68
Principal paid = payment - interest = $ 1740.44 - 774.68 = 965.76
Balance = 14085 - 965.76 = 13119
13119 is the unpaid balance after 2 payments.
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