Table 14-1
| Table 14.1 Amortization Payment Factors per $1,000 Borrowed | | |
| | | | | | |
| | | | | Amount of Monthly Payment per $1,000 Borrowed | |
| | | | | | | | | |
| | | Term of | | | Annual Interest Rate | | |
| | | Loan | 4.5% | 6% | 7.5% | 9% | 10.5% | 12% |
| 1 | | month | 1003.75000 | 1005.00000 | 1006.25000 | 1007.50000 | 1008.75000 | 1010.00000 |
| 2 | | months | 502.81425 | 503.75312 | 504.69237 | 505.63200 | 506.57203 | 507.51244 |
| 3 | | months | 335.83645 | 336.67221 | 337.50865 | 338.34579 | 339.18361 | 340.02211 |
| 4 | | months | 252.34814 | 253.13279 | 253.91842 | 254.70501 | 255.49257 | 256.28109 |
| 5 | | months | 202.25561 | 203.00997 | 203.76558 | 204.52242 | 205.28049 | 206.03980 |
| 6 | | months | 168.86099 | 169.59546 | 170.33143 | 171.06891 | 171.80789 | 172.54837 |
| | | | | | | | | |
| 1 | | year | 85.37852 | 86.06643 | 86.75742 | 87.45148 | 88.14860 | 88.84879 |
| 2 | | years | 43.64781 | 44.32061 | 44.99959 | 45.68474 | 46.37604 | 47.07347 |
| 3 | | years | 29.74692 | 30.42194 | 31.10622 | 31.79973 | 32.50244 | 33.21431 |
| 4 | | years | 22.80349 | 23.48503 | 24.17890 | 24.88504 | 25.60338 | 26.33384 |
| 5 | | years | 18.64302 | 19.33280 | 20.03795 | 20.75836 | 21.49390 | 22.24445 |
| 10 | | years | 10.36384 | 11.10205 | 11.87018 | 12.66758 | 13.49350 | 14.34709 |
| 15 | | years | 7.64993 | 8.43857 | 9.27012 | 10.14267 | 11.05399 | 12.00168 |
| 20 | | years | 6.32649 | 7.16431 | 8.05593 | 8.99726 | 9.98380 | 11.01086 |
| 25 | | years | 5.55832 | 6.44301 | 7.38991 | 8.39196 | 9.44182 | 10.53224 |
| 30 | | years | 5.06685 | 5.99551 | 6.99215 | 8.04623 | 9.14739 | 10.28613 |
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Eric Russell borrowed $2,400 from a financial loan company which amortized the loan at 12% over 3 months. Using Table 14-1, the first two monthly payments are $816.05. (The last payment may be slightly different.) Complete the amortization schedule and solve the effective rate problem.
| | | Unpaid | Interest | Total | Principal | New |
| | Month | Balance | Payment | Payment | Payment | Balance |
| a. | 1 | ______ | ______ | $816.05 | ______ | ______ |
| b. | 2 | ______ | ______ | $816.05 | ______ | ______ |
| c. | 3 | ______ | ______ | ______ | ______ | ______ |
| | |
| d. | Use Russell's amortization schedule to compute the approximate effective interest rate using |
| | |
| |  |
| | |
| | where P is the average principal over the 3-month period, I is the total amount of interest, and T is 3/12 year. |
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