Objectives:
|
|
Vocabulary:
|
Formulas:
|
Amortization Schedule Steps:
- Findthe interest on amount use – Use the simple interest formula.
- Principal portion is payment minus interest portion.
- New balance is previous balance minus principal portion. for the last period
- Principal portion is previous balance.
- Total payment is sum of principal portion and interest portion.
| Payment Number |
Principal Portion |
Interest Portion |
Total Payment |
Balance |
| 0 |
----- |
----- |
----- |
loan amount |
| firtst through next-to-last |
total payment minus interest
portion |
simple interest on previous
balance |
use simple interest amortized
loan formula |
previous balance minus this
payment's principal portion |
| last |
previous balance |
simple interst on previous
balance |
principal portion plus
interest portion |
$0.00 |
Possible
Classroom Examples:
- Find the monthly payment and the total interest for the given
simple interest amortized
loan of $20,000 at
for 
years. - Shirley Trembly bought
a house for $187,600. She put 20% down and obtained a simple interest
amortized loan for the balance at
for 30 years. - Find her monthly payment.
- Find the total interest.
- Prepare an amortization schedule for the first two months of the loan.
- Most lenders will approve a home loan only if the total of all the borrower’s monthly payments, including the home loan payment, is no more than 38% of the borrower’s monthly income. How much must Ms. Trembly make in order to qualify for the loan?
- Barry wood wants to buy a used car that costs $4000. He has two
possible loans in mind. One loan is through the car dealer: it is a
3-year add-on interest loan at 6% and requires a down payment of $300.
The second loan is through his credit union; it is a 3-year simple
interest amortized loan at 9.5% and requires a 10% down payment.
- Find the monthly payment for each loan.
- Find the total interest paid for each loan.
- Which loan should Barry choose? Why?
- Some lenders are now offering 15-year home loans. Investigate the effect of the term on home loans by finding the monthly payment and total interest for a loan of $100,000 at 10% for the following terms.
- 30 years
- 15 years
© 2007 Elizabeth E. K. Jones and the
ASU
Department of
Mathematics and Statistics - All rights reserved.