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ECON 435: Amortization rules

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rolaceltrnoc ECON 435 > ECON 435: Amortization rules

Paying back a loan

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%

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This page was last modified on 31 December 2007, at 13:21.
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