Amortization starts on page 35 in your packet:
1. AMORTIZATION TABLE
An amortization table takes a payment and splits it into the part that pays off (part of) the principal and the part that pays the interest.
Interest payments help the company, NOT YOU. You want to pay as much toward the PRINCIPAL as possible. The interest will be taken out FIRST.
TABLE for JR's amortization (We are only doing 11 months, not 36!!!) :
JR owes $3000, with an 16.8% Annual Percentage Rate.
He will pay $319.97 per month
16.8% APR / 12 months = 1.4% per month = 0.014
Month Balance Interest Paid Principal Paid New Balance
1 $3000 3000*.014= $42 319.97-42 =$277.97 3000-277.97 =$2722.03
2 $2722.03 *.014 = $38.11 319.97-38.11=$281.86 2722.03-281.86=$2440.17
3 $2440.17 *.014 = $34.16 319.97-34.16=$285.81 2440.17-285.81=$2154.36
4 $2154.36 *.014 = $30.16 319.97-30.16=$289.81 2154.36-289.81=$1864.55
5 $1864.55 *.014 = $26.10 319.97-26.10=$293.87 1864.55-293.87=$1570.68
6 $1570.68 *.014 = $21.99 319.97-21.99=$297.98 1570.68-297.98=$1272.70
7 $1272.70 *.014 = $17.82 319.97-17.82=$302.15 1272.70-302.15=$970.55
8 $970.55 *.014 = $13.59 319.97-13.59=$306.38 970.55-306.38 =$664.17
9 $664.17 *.014 = $9.30 319.97-9.30 =$310.67 664.17-310.67 =$353.50
10 $353.50 *.014 = $4.95 319.97-4.95 =$315.02 353.50-315.02 =$38.48
11 $38.48 *.014 = $0.54 $38.48 =$0
His last payment needs to be for $0.54 + $38.48 = $39.02.
FINANCE APP NOTES (this was on the board, not in the packet)
Pheonix has a balance of 6759, with an APR of 19.8%. She can pay $275 each month. How long will it take to pay it off?
N = X
I% = 19.8
PV = 6750 (not negative)
PMT = -275 (negative; it's coming out of her pocket)
FV = 0 (to pay off)
P/Y = 12 (always monthly for credit cards)
C/Y = 12
END
X = 31.73 months. We must round UP, because 31 months is not enough. X = 32 months
32/12 = 2.67 years (2 years, 8 months)
Hints for the Homework Assignment:
(1) Page 40 in your packet (should be already done)
Part (a) is the long part.Step 1: Look at the starting balance, and the list of transactions, and
find the balance after each transaction.
***HINT*** If 2 or more transactions happen in the same day, do it all in one step.
Step 2: Figure out how many days the balance stays at each $ amount.
***HINT*** Your number of days should be: 1, 3, 3, 4, 4, 4, 3, 1, and 8.
Step 3: Multiply each balance $ amount by the number of days.
Step 4: Add up all the answers from Step 3.
Step 5: Divide by the number of days in the month
***HINT*** There are 31 days in March.
***HINT*** Your final answer should be $28__.60 (I'm leaving two digits out)
This is your AVERAGE DAILY BALANCE.
Part (b): ***HINT*** daily periodic rate = APR/number of days = 18.99/365
***HINT*** Once you get your answer, change it to a decimal by dividing by 100.
Part (c)
Step 1: Get the finance charge
***HINT*** finance charge = (AVE DAILY BALANCE)(daily periodic rate)(number of days)
= (answer from part a)(answer from part b)(31)
Step 2: Get the new balance
***HINT*** new balance = old balance + debits - credits + finance charge
= $2655.25+585.04-198.25+answer from step 1
Part (d)
***HINT*** percentage paid = minimum payment / new balance * 100%
= 75/(answer to part c) * 100
(2) Page 41 in your packet
This is like the notes from today, above.
***HINT*** Start by applying sales tax to the price to get your starting balance:
799.99 + 0.0825*799.99 = $865.99
***HINT*** To get the old balance (for every month after 1), copy it from the previous new balance
***HINT*** The APR is 27.99. You need to divide that by 12 months and
convert to a decimal by dividing by 100. That gives you 0.023325.
To get the interest paid each month, multiply the OLD BALANCE by 0.023325.
***HINT*** To get the principal paid each month, subtract $80 - the interest paid.
***HINT*** To get the new balance each month, subtract OLD BALANCE - PRINCIPAL PAID
The first 3 rows should look like:
MONTH BALANCE INTEREST PAID PRINCIPAL PAID NEW BALANCE
1 $865.99 $20.20 $59.80 $806.19
2 $806.19 $18.80 $61.20 $744.99
3 $744.99 $17.38 $62.62 $682.37
(3) On the blank page 42, use the finance app to solve #5 on page 35.
***HINT*** Use the finance app
***HINT*** N is always 12*2, since payments are monthly for 2 years
***HINT*** I% and PV are given in the bullet points of #5 on page 35
***HINT*** PMT is "X" - This is what you are trying to find.
***HINT*** FV should be 0, since you are trying to pay it off.
***HINT*** P/Y and C/Y are both 12 (monthly for all credit card problems)
***HINT*** you should make sure payments are set to "end".
***HINT*** Your 4 answers should be $3__.89, $4__.76, $8_.42, and $1__.52 (leaving out digits)
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