Loan Amortization Using Present Value of Annuity Formula

Рет қаралды 67,391

5 жыл бұрын

Students can use this video to better understand Section 4.5 of "Corporate Finance" [12th Edition] by Ross, Westerfield, Jaffe and Jordan.
In this video I explain loan amortization using a numerical example. Specifically, I explain how loan amortization is a simple application of the Present Value of Annuity formula, and how one can, therefore, use this formula to calculate the constant periodic payment that needs to be made to retire the loan (with interest). I also construct a simple loan amortization table to show how the constant payment calculated retires the principal and interest expense overtime.

Пікірлер: 44

@user-uu3gd8eo1c 8 ай бұрын

super! it took me over 15 videos to find this answer and you nailed it! thanks.... I was looking for the table you created to understand how interest and C were linked together. very well done, thanks

@olivermathiasen3594 9 ай бұрын

Man i have been struggle with this subject for so long. This video really helped me. Im 16 atm, and dont have chance for school atm. So im self studying and now i can finaly understand this subject. Thank you thank you thank you. Thank you so much. This means everything to me.

@professorikram 9 ай бұрын

Kudos to you for self learning. If you feel stuck, reach out. Will try my best to help you.

@nakazzihadijjah1465 3 жыл бұрын

Wow, so helpful, Detailed, got more than I needed, thanks

@kaichuanyu5964 3 жыл бұрын

sir, you are a legend!

@SamarthPandya 3 жыл бұрын

Very well explained.I like the explanation

@hadirizmeen140 2 жыл бұрын

Ado machan thank you bn

@mannasehmbunji9921 3 жыл бұрын

This is so helpful

@ver0nica1982 2 жыл бұрын

You are a wonderful teacher.

@fsocietyyyyy 2 жыл бұрын

you are a wonderful liar

@balochkareem4931 Жыл бұрын

Thank you Sir.

@Eliza-sm2en 2 жыл бұрын

thank you

@josemastery955 2 жыл бұрын

Expert🙌🙌

@ounoudmohamadhamie7872 2 жыл бұрын

best of the best

@sidramasooma6941 2 жыл бұрын

Saviour 💯❤️

@nambulaharriet7559 2 жыл бұрын

Are we not supposed to divideth e interest by 12 months since it is saying annually

@aryaman4068 2 жыл бұрын

This video is gold

@professorikram 2 жыл бұрын

Thank you Saksham! Also, I have recently created a website called SimpliTaught (www.SimpliTaught.com). It's in beta mode right now, but check it out. There, you can find curated content for your college textbooks. Would welcome any feedback.

@oxgn. 3 жыл бұрын

How to solve the last part 10000=c(1-1/(1.08)^5/.08

@amyhuang3974 Жыл бұрын

what if i have 3 annuities instead of once per year?

@sashikaudaini3477 3 жыл бұрын

thank you sir

@professorikram 2 жыл бұрын

Thank you Sashika! Also, I have recently created a website called SimpliTaught (www.SimpliTaught.com). It's in beta mode right now, but check it out. There, you can find curated content for your college textbooks. Would welcome any feedback.

@jandogroniloa.881 2 жыл бұрын

@@professorikram good day sir, what "t" Means for?, is it the number of payments to the given years? In my module is compounded quarterly for 3 years so the t=12?

@miyazaki2542 2 жыл бұрын

sir i have a question, if it said beginning of each year, would the chart be same? or the interest be zero in the first year of installment?

@professorikram 2 жыл бұрын

Hello Miyazaki. If the payment is at the beginning of the year, then divide your answer by (1+r), where r is the interest rate. So, in the example above, you would do ($2,504.56/1.08) = $2,319.04. You will notice that the yearly payment is lower. That's because the first payment you make towards the loan is immediate and hence you don't accrue interest. Hope this helps!

@miyazaki2542 2 жыл бұрын

@@professorikram thank you so much, sir, i was having a hard time understanding the loan amortization schedule, your video and explanation helped me learning it, thank you for replying to my question.