Amortization Schedule Concepts

This tutorial explains how to construct an amortization schedule using the BA2 Plus calculator. It covers the definition and components of an amortization schedule, provides an example of calculating loan payments for a $20,000 loan with 8% interest compounded quarterly, and guides through setting up the calculator and constructing the schedule. The tutorial concludes with completing the schedule and calculating totals.

What is the primary purpose of an amortization schedule?

• To display how a loan is repaid over time

• To calculate the total interest paid over the loan term

• To determine the creditworthiness of a borrower

• To set the interest rate for a loan

In the example provided, what is the principal amount of the loan?

• $10,000

• $15,000

• $20,000

• $25,000

How often is the interest compounded in the given example?

• Quarterly

• Monthly

• Annually

• Semi-annually

What should the 'payments per year' setting be for annual payments?

• 1

• 2

• 4

• 12

What is the purpose of setting 'Cy' to four?

• To calculate the total loan amount

• To set the compounding frequency

• To adjust the interest rate

• To set the number of payments per year

What is the interest rate used in the example?

• 7%

• 6%

• 5%

• 8%

What is the calculated yearly payment amount?

• $7,711.14

• $8,711.14

• $6,711.14

• $5,711.14

What is the feature value set to during the calculation?

• 10,000

• 5,000

• 20,000

• 0

What is the first step in constructing the amortization schedule?

• Set the interest rate

• Calculate the total interest

• Determine the loan term

• Re-enter the payment amount

What does 'P1' represent in the amortization schedule?

• The total interest paid

• The starting period

• The ending period

• The principal amount