# ECON 435: Amortization rules

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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%