Amortization Schedule Concepts

The video tutorial explains how to fill in an amortization schedule for a loan with four level payments. It covers calculating the original loan amount, determining the interest rate, and completing the schedule. Additionally, it provides an example of a 30-year mortgage, detailing how to calculate monthly payments, total principal and interest paid, and the outstanding balance after five years.

What is the purpose of an amortization schedule?

• To find the monthly payment amount

• To track the outstanding balance, interest, and principal over time

• To calculate the total interest paid over the loan period

• To determine the initial loan amount

How do you calculate the original outstanding balance at time equals zero?

• By dividing the interest accumulated by the outstanding balance at time equals one

• By multiplying the interest rate by the outstanding balance at time equals one

• By adding the principal to the outstanding balance at time equals one

• By subtracting the principal from the outstanding balance at time equals one

How is the interest rate determined in the amortization schedule?

• By subtracting the principal at time equals one from the interest accumulated at time equals one

• By adding the interest accumulated at time equals one to the outstanding balance at time equals zero

• By multiplying the principal at time equals one by the outstanding balance at time equals zero

• By dividing the interest accumulated at time equals one by the outstanding balance at time equals zero

What is the next step after calculating the interest for a period in the amortization schedule?

• Subtract the interest from the payment to find the principal

• Divide the interest by the payment to find the principal

• Add the interest to the payment to find the principal

• Multiply the interest by the outstanding balance to find the principal

What is the effective monthly interest rate for the 30-year mortgage loan?

• 0.005%

• 5%

• 0.05%

• 0.5%

How is the total interest paid over the 30-year mortgage period calculated?

• By dividing the total payments made by the total principal

• By subtracting the total principal from the total payments made

• By adding the total principal to the total payments made

• By multiplying the total principal by the interest rate

What method is used to find the outstanding balance after five years?

• Amortization method

• Retrospective method

• Prospective method

• Interest method

How is the principal paid in the first five years calculated?

• By dividing the outstanding balance at year five by the original loan amount

• By multiplying the outstanding balance at year five by the original loan amount

• By adding the outstanding balance at year five to the original loan amount

• By subtracting the outstanding balance at year five from the original loan amount