BOHOL ISLAND STATE UNIVERSITY

Clarin Campus
College of Teacher Education

Vision: A premier Science and Technology university for the formation of world class and virtuous human resource for
sustainable development in Bohol and the country.

Mission: BISU is committed to provide quality higher education in the arts and sciences, as well as in the professional and
technological fields; undertake research and development and extension services for the sustainable development of Bohol
and the country.

UNIT 5: Amortization and Sinking Fund

“Computation of the Outstanding Balance”

I. Learning Objectives

At the end of the lesson, the students will be able to:

 Define the key concepts of outstanding balance of a loan.
 Apply the knowledge in solving the exact outstanding balance of a loan.
 Foster a positive attitude when faced with challenges or confusion related to
understanding outstanding balance.

II. Concept Notes

Outstanding balance refers to the amount still owed on a loan from the
perspective of a borrower or lender.

a) Formula:
1−(1+𝑖)−(𝑛−𝑘)
B𝜅 = 𝑅 [ 𝑖
]

where:
R= Regular Payment
k= the term
m= frequency of conversion
n= m(t)
t= in years (term of the loan)
 (b) Examples

1) Mr. Moran is paying Php81,372.02 yearly for a loan worth Php500,000.00. If the interest
rate is 10% and the loan is payable by 10 years, how much is the outstanding balance
after the 6th payment?

Given:
R= 81,372.02
j= 10%
t= 10 years
n= m(t) = (1)(10) =10
K= 6(sixth payment)
j .10
i= =
m 1

1−(1+𝑖)−(𝑛−𝑘)
B𝜅 = 𝑅 [ ]
𝑖

0.10 −(10−6)
1−(1+ )
1
B𝜅 = 81,372.02 [ ]
.10
4,641
14,641
= 81,372.02[ ]
.10
= 81372.02(3.169865446)

B𝜿 = Php257,938.35

2) Mrs. Lazaro got a loan worth Php800,000.00. She promised to pay the loan every 6
months in 5 years. The semi-annual payment is Php103,603.66, if money is worth 10%
compounded semi-annually. How much is the outstanding balance after the 3rd term?

Given:
800,000 (loan)
R= 103,603.66
m= 2
k= 3
t= 5 years
n= m(t)= 2(5)
j .10
i= =
m 2
 1−(1+𝑖)−(𝑛−𝑘)
B𝜅 = 𝑅 [ ]
𝑖

0.10 −(10−3)
1−(1+ )
2
B𝜅 = 103,603.66 [ ]
.05
=103,603.66 (5.786373398)

B𝜿 =Php599,489.46

c) Practice Problems

1) Mr. Ocampo is considering to pay his outstanding balance after 3 years of

payment. The original amount of the loan is Php100,000 payable annually in 5
years. If the interest rate is 10% per annum and the regular payment is
Php26,379.75 annually, how much is the outstanding balance after the 3 rd
payment?

Given:
R= 26,379.75
t=5
k=3
m=1
n= m(t)=1(5)
j .10
i= =
m 2
1−(1+𝑖)−(𝑛−𝑘)
B𝜅 = 𝑅 [ ]
𝑖

0.10 −(5−3)
1−(1+ )
1
B𝜅 = 26,379.75 [ .10
]

B𝜿 = Php45,783.04

2) Mrs. Se borrowed some money from a bank that offers an interest rate of 12%
compounded monthly. His monthly amortization for 5 years is Php11,122.22.
How much is the outstanding balance after the 12th payment?
Given:
R=11,122.22
m= 12
t=5
k=12
n=m(t)= 12(5)
j .12
i= =
m 12

1−(1+𝑖)−(𝑛−𝑘)
B𝜅 = 𝑅 [ ]
𝑖
.12
1−(1+ 12 )−(60−12)
=11,122.22[ .12 ]
12

B𝜿 =P422,354.73

III. References
Sab, S. (2021). Solving for amortization and outstanding balance. Loan
Repayment. Retrieved from http://www.youtube.com/@thesigmacat-o.o-

Prepared by:

MICHELLE L. PAGOD
Group Leader

ERRYL JOY BUCIO

Member

JOSE ELJAY PINOTE

Member

Noted by:

REZEL JAY A. LARODA, MSc

Mathematics Instructor