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AMORTIZED LOAN - PowerPoint PPT Presentation


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AMORTIZED LOAN. A LOAN THAT IS REPAID IN A SERIES OF PAYMENTS THAT COVER INTEREST AND PRINCIPAL. IN OTHER WORDS, EACH PAYMENT INCLUDES BOTH PRINCIPAL AND INTEREST. MAY BE LEVEL PAYMENTS OR DECREASING PAYMENTS. FULLY AMORTIZED LOAN.

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Presentation Transcript
amortized loan
AMORTIZED LOAN
  • A LOAN THAT IS REPAID IN A SERIES OF PAYMENTS THAT COVER INTEREST AND PRINCIPAL.
  • IN OTHER WORDS, EACH PAYMENT INCLUDES BOTH PRINCIPAL AND INTEREST.
  • MAY BE LEVEL PAYMENTS OR DECREASING PAYMENTS
fully amortized loan
FULLY AMORTIZED LOAN
  • ONE WHERE THE PERIODIC LOAN PAYMENTS ARE SUFFICIENT TO PAY OFF THE ENTIRE PRINCIPAL AMOUNT OF THE LOAN OVER THE TERM OF THE LOAN
partially amortized loan
PARTIALLY AMORTIZED LOAN
  • THE PERIODIC LOAN PAYMENTS MAKE SOME REDUCTION IN THE PRINCIPAL BALANCE BUT DO NOT FULLY PAY OFF THE ENTIRE PRINCIPAL OVER THE TERM OF THE LOAN
balloon payment
BALLOON PAYMENT
  • A LUMP SUM PAYMENT OF PRINCIPAL DUE AT THE END OF THE TERM OF THE LOAN.
  • REPRESENTS THE REMAINING UNPAID PRINCIPAL BALANCE.
amortization schedule
AMORTIZATION SCHEDULE
  • A TABLE THAT DETAILS THE PAYMENTS, PRINCIPAL PAID, INTEREST PAID, AND REMAINING PRINCIPAL BALANCE FOR A PROMISSORY NOTE.
amortization problem
AMORTIZATION PROBLEM
  • YOU HAVE PURCHASED A FARM AND FINANCED $50,000 FOR 5 YEARS AT 8%.
  • YOU HAVE TWO OPTIONS:
    • LEVEL PAYMENTS
    • DECREASING PAYMENTS