Directions:
Figure out the average monthly payments for two purchases made with loans using the amortization calculation formula.
Alternatives: Do your own amortization calculations using spreadsheet software* or generate an amortization payment chart by using an online financial calculator.
Amortization Calculation Formula
A = payment amount
P (aka pv) = principal (the present value of the loan)
R = interest rate, per period (decimal number)
N = total number of payments over which the loan will be repaid
| Description | Present Value of Loan (pv) | Annual Interest Rate (APR) | Interest Rate Per Period (r) | Number of Payments (n) | Payment Amount (A) | Total Amount to be Repaid |
| Example- Cash Loan | $100 | 40.0% | 40% / 12 = $3.33% | 6 | $18.66 | $18.66 x 6 = $111.96 |
| Big-Screen TV | $700 | 7.0% | 7% / 12 = .58% | 24 | ||
| College Loan | $12,000 | 3.5% | 3.5% / 12 = .29% | 180 |
*See Microsoft Excel File, “Amortization Calculation”