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Amortization With An Irregular Final Payment

A debt of 8,800 with 5% interest payable semi-annually will be paid off with payments of 1,200 every 6 months. To find the final payment amount and due date: 1) calculate the outstanding principal after the last regular payment of 1,200; 2) add 6 months of interest to that amount to determine the final payment required. For example, the outstanding principal after the 5th payment of 1,200 is calculated, then the 6th payment amount including principal and interest is the final payment, showing when it is due.

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3K views

Amortization With An Irregular Final Payment

A debt of 8,800 with 5% interest payable semi-annually will be paid off with payments of 1,200 every 6 months. To find the final payment amount and due date: 1) calculate the outstanding principal after the last regular payment of 1,200; 2) add 6 months of interest to that amount to determine the final payment required. For example, the outstanding principal after the 5th payment of 1,200 is calculated, then the 6th payment amount including principal and interest is the final payment, showing when it is due.

Uploaded by

ces_26
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Amortization with an Irregular Final Payment

A debt of Php. 8800 with interest at 5% payable semi annually, will be discharged by payments of 1200, at the end of each 6 months as long as necessary, find when the final payment is due.

Amortization Schedule

To find the outstanding principal just after any particular payment, when periodic payments are made which are amortizing a debt with original principal. Formula: Out Prin. = FV (compound Int.) less FV ( ordinary Annuity) of past payments.

To find the final payment when a debt is to be discharged, principal and interest included. 1. Find the outstanding principal just after the last regular payment. 2. Add interest for one payment interval to the result in order to determine the final smaller payment.

Example 2
For a debt in example 1 without making up the amortization schedule A. Find the outstanding principal just after the 5th payment; B. Find the principal and interest paid on the 6th installment, C. Find the final payment and when it is due.

Practice Exercises
1. A debt of Php. 10,000 with interest at 5% payable annually will be discharged included, by payments of 2000 at the end of each month as long as necessary. Construct the amortization schedule. Without using amortization table in no.1, Find the outstanding principal after the third payment and final payment when it is due.

2.

A farm is worth 140,000 cash. The buyer pays to pay Php 20,000 at the end of one year, 25000 at the end of 2 years, and 10,000 at the end of each year thereafter as long as necessary to discharge all liability with interest rate of 6% compounded annually. (a) find the unpaid principal just after the 4th payment of 10000, (b) Find the final payment and when it is due.

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