Chapter 5 lecture

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Unformatted text preview: ayment – We can use PMT function to get the loan We payment payment – Example: • We pay off a $10,000, 8% loan in five annual We payments payments 30 Amortization Tables 31 Amortization Tables Once we know the payment, we can set up the Once table: table: end of year 1 2 3 4 5 balance $ 10,000.00 $ 8,295.44 $ 6,454.51 $ 4,466.30 $ 2,319.04 payment ($2,504.56) ($2,504.56) ($2,504.56) ($2,504.56) ($2,504.56) interest $ (800.00) $ (663.63) $ (516.36) $ (357.30) $ (185.52) principal ($1,704.56) ($1,840.93) ($1,988.20) ($2,147.26) ($2,319.04) 32 Another Amortization Another Problem Problem – Joe is just buying a house for $200,000 – He is getting a 30-year mortgage for He $180,000 w/ 6% annual interest rate $180,000 – What is his monthly payment? – How much interest will he pay during the How first year? first Reference (Another Example): Reference File: OtherPracticeProblems_Chp5.xls File: Worksheet: “Amortization” 33 How long will it take to pay How off a loan? off – Assume you borrow $10,000 and you want Assume to make annual payments of $2,000 to pay it off it – The interest rate on the loan is 7.5% – How long does it...
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