ECON 435: Amortization rules
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rolaceltrnoc ECON 435 > ECON 435: Amortization rules
Paying back a loan
Contents |
Ways to pay back loans
Pure discount loans
Pay back in a lump sum the principal & intereests due @ maturity
Interest-only loans
Pay interests during loan period and principal (plus final interest payment) at maturity
Amortized loans
Over time, both interest & principal are paid according to a pre-specified schedule
Formula
- Formula is the same as the present value formual
- PV = [C /r ] x {1 - (1 + r)^-t}
- You want to calculate C (payments)
- HE WILL ASK YOU TO DO A PROBLEM USING THIS FORMULA ON MIDTERM
==Lecutre%
