BUSINESS MATH ACTIVITY SHEET

AMORTIZATION

Amortization Formula
The payment per period P M for a given amount of loan P under an i interest rate per period to be paid in n
periods can be calculated as:
P ∙ i∙ ( 1+ i )n
PM= n
.
( 1+i ) −1
In here, the interest is assumed to be compounded monthly. Given these conditions, the interest rate per period
and the number of payments per period can be calculated as
annual interest rate
i=interest rate per period=
12
n=number of payment periods=number of years×12.

An oven has a list price of P30000.00 and a trade discount of 3%. The seller calls for
a 20% down payment with the balance payable in a year at 1% per month interest
rate.

Prepare the amortization schedule for the first 6 months.

Month amortization principal interest Loan balance