# Using the Loan Amortization Chart An interactive Loan Amortization Chart is provided on Connect….

Using the Loan Amortization Chart An interactive Loan Amortization Chart is provided on Connect. In Chapter 14 of the Student Edition, find “Amortizing Loan Calculator.” The chart has data boxes in which you enter values for key variables. You can either enter the “Loan amount” and then calculate the monthly payment, or you can enter the “Monthly payment” and then calculate the initial amount of the loan. The chart will handle only loans having monthly payments and monthly compounding of interest. After entering new data, click on the “Calculate” button to generate a new chart. For loan terms of up to 30 months, the bar chart presents the balance after every payment. If you move the cursor over any bar in the chart, the balance (rounded to the nearest dollar) will be displayed. For terms of 31 to 120 months, there is a bar for every second or fourth payment. For terms of 121 months to 360 months, there is a bar for each year representing the beginning balance. Boxes below the data-entry area display the sum of the payments and the total interest paid over the life of the loan. If you click on the “View Report” button, a window will open showing the complete amortization schedule.

Enter 10,000 for the “Loan amount” and 7.5% for the monthly compounded “Interest rate.”

(a). Compare the profiles of the bar charts for loan terms of 30 months and 30 years.

Approximately what percentage of the original principal is paid off midway through the term in each case?

(b). Prepare a table presenting the total interest paid over the life of the loan for terms of 5, 10, 15, 20, 25, and 30 years.

(c). Next, vary the “Term in months” to find the term for which the total interest paid over the life of the loan equals:

(i) the original principal, and

(ii) 1.5 times the original principal

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