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.

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Presentation transcript:

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 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 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 A LUMP SUM PAYMENT OF PRINCIPAL DUE AT THE END OF THE TERM OF THE LOAN. REPRESENTS THE REMAINING UNPAID PRINCIPAL BALANCE.

AMORTIZATION SCHEDULE A TABLE THAT DETAILS THE PAYMENTS, PRINCIPAL PAID, INTEREST PAID, AND REMAINING PRINCIPAL BALANCE FOR A PROMISSORY NOTE.

(1)(2)(3)(4)(5)(6) PAYMEN T BEG. BAL. PAYMEN T INTERES T PRINCIPA L ENDING BAL. 180, , , , , AMORTIZATION SCHEDULE LEVEL PAYMENT

AMORTIZATION PROBLEM YOU HAVE PURCHASED A FARM AND FINANCED $50,000 FOR 5 YEARS AT 8%. YOU HAVE TWO OPTIONS: LEVEL PAYMENTS DECREASING PAYMENTS

(1)(2)(3)(4)(5)(6) PAYMENT BEG. BAL.PAYMENTINTERESTPRINCIPALENDING BAL. 150, , , , , , , , , , , , , , , , , , , TOTAL62, , , AMORTIZATION SCHEDULE LEVEL PAYMENT

(1)(2)(3)(4)(5)(6) PAYMENT BEG. BAL.PAYMENTINTERESTPRINCIPALENDING BAL. 150, , , , , , , , , , , , , , , , , , TOTAL62, , , AMORTIZATION SCHEDULE DECREASING PAYMENT