An amortization schedule is typically used to describe compound-interest loans that have a fixed amount to be paid each period (often months) until the entire principal and interest have been paid off. It shows how the principal (initial amount borrowed) and interest accrued change from month to month, assuming that payments are made on time.
Most K201 students find the unit on amortization tables to be pretty easy. Once you've done one, you've done them all! Nevertheless, today we present two different problems that involve using the
PMT formula to construct an amortization table (if you're curious as to how the PMT formula actually works, see this article for an explanation of how to derive and solve the geometric series for amortizing loans.)
In the next video, Dalia will go over some of the other financial formulas covered by GP6.