AMORTIZATION

 Gradual repayment of a loan in equal (or nearly equal) installments which include portions of interest and principal amounts.  Writing off an intangible asset investment over theprojected life of the assets

amortization table
A schedule for amortization, or the repayment of a largeloan over a fixed period of time in fixed installments. Each paid installment counts toward the principal balance and interest of the loan. The amortization table will report interestpaid-to-date and principal-paid-to-date.

1. A man borrows

Php. 15000 with the agreement that money is worth 5% compounded annually. The debt is to be paid, interest included by equal installments at the end of each year for 5 years. Find the annual payment and construct an amortization schedule.

Solution:
 Find the periodic payment  Find the initial interest  Find the repayment of principal  Find the remaining indebtedness  Construct an amortization

schedule.

Year

Outstanding Principal at beg. Of year P.15,000

Interest at 5% due at end of year P.750.00

Total payment at end of year P 3464.22

For repayment of Principal at end of year. P 2714.62

12285.38

Totals

2323.11

17,323.11

15,000.00

2.

What equal payments at the end of each year for 5 years will be sufficient to pay the principal and the interest on a debt of Php. 100,000 if interest at the rate of 7% payable at the end of each year on all principal outstanding during the year.

Assignment
1. Make an amortization table for Php. 225,000 loan of a hose and lot for 25 years with 9% compounded annually. 2. Using problem No.1, If the debtor is already paying for 6 years and decided to shortened the length of the loan for only 15 years, how much will be the outstanding balance and how much will be the monthly payments.

Sinking Fund