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Unformatted text preview: A is the present value of the loan, R = r = n = A = R[1 – (1+r)-n ] r The most expensive car that Jack can afford is (to the nearest dollar). 6 Amortization of Loans The loan outstanding at the end of a given period = The loan outstanding at the beginning of the period minus the amount of principal that was repaid during the period. • Interest paid for the period = (r)(loan outstanding at the beginning of the period) • Principal repaid = R - Interest paid for the period 2 7 Amortization of Loans Ex 5.5, pp. 221-222, problem 7 Construct an amortization schedule for a loan of $5,000 repaid by 4 equal yearly repayments with interest at 7% compounded annually. First find the repayment, R, per year. A = r = n = 4 R = rA [1 – (1+r)-n ] 8 Amortization Schedule Principal Interest Payment Principal Outst’g paid for repaid (beginning) period 1 2 3 4 Total...
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This note was uploaded on 06/16/2010 for the course ECON 220 taught by Professor Drea during the Spring '10 term at Uni. West.
- Spring '10