8.4B Amortization Tables Worksheet

Front

What is an amortization table?

Back

An amortization table is a schedule that details each payment on a loan over time, showing the amount applied to principal and interest for each payment.

Front

Define adjustable-rate mortgage (ARM).

Back

An adjustable-rate mortgage (ARM) is a type of mortgage where the interest rate may change periodically based on changes in a corresponding financial index.

Front

What is the formula to calculate monthly mortgage payment?

Back

M = P[r(1 + r)^n] / [(1 + r)^n – 1], where M is the total monthly mortgage payment, P is the principal loan amount, r is the monthly interest rate, and n is the number of payments.

Front

What does APR stand for?

Back

APR stands for Annual Percentage Rate, which represents the yearly interest rate charged on borrowed money.

Front

How do you calculate the interest portion of a mortgage payment?

Back

Interest portion = Remaining loan balance x Monthly interest rate.

Front

What is the significance of the introductory rate in an ARM?

Back

The introductory rate is the initial interest rate offered for a specific period, which is usually lower than the standard rate.

Front

What happens to monthly payments after the introductory period of an ARM?

Back

After the introductory period, the interest rate adjusts based on the market, which can increase or decrease the monthly payment.

Front

What is the impact of a higher interest rate on monthly mortgage payments?

Back

A higher interest rate increases the monthly mortgage payment, making the loan more expensive over time.

Front

What is the purpose of an amortization schedule?

Back

The purpose of an amortization schedule is to provide a detailed breakdown of each payment, showing how much goes towards interest and how much reduces the principal.

Front

How is the remaining balance of a mortgage calculated after a payment?

Back

Remaining balance = Previous balance - Principal paid in the current payment.