Amortization

&NewLine;<&excl;-- WP QUADS Content Ad Plugin v&period; 2&period;0&period;95 -->&NewLine;<div class&equals;"quads-location quads-ad1" id&equals;"quads-ad1" style&equals;"float&colon;left&semi;margin&colon;0px 0px 0px 0&semi;">&NewLine;&NewLine;<&sol;div>&NewLine;<p>• The above steps are repeated each year until the mutually agreed period of loan is exhausted&period;<&sol;p>&NewLine;<h3>Example<&sol;h3>&NewLine;<p>A financial institution grants loan of &dollar;2&comma;000&comma;000 to an industrial unit at a cost of debt of 16&percnt; per annum&period; The lender requires the loan to be repaid in ten equal annual installments becoming due at the beginning of each year&period;<br &sol;>&NewLine;Required&colon;<&sol;p>&NewLine;<p>Work out the amortization table for the loan repayment&period;<&sol;p>&NewLine;<h3>Solution<&sol;h3>&NewLine;<p>Annual Installment &equals; &dollar;2&comma;000&comma;000 &sol; &lpar;PVIFAD&rpar; <span style&equals;"font-size&colon; xx-small&semi;">16&percnt; &comma; 10<&sol;span><&sol;p>&NewLine;<p>Or through excel formula which is&colon;<&sol;p>&NewLine;<p>&equals;PMT &lpar;0&period;16&comma;10&comma;2000000&comma;0&comma;1&rpar; &equals; &dollar;356&comma;726<&sol;p>&NewLine;<&excl;-- WP QUADS Content Ad Plugin v&period; 2&period;0&period;95 -->&NewLine;<div class&equals;"quads-location quads-ad2" id&equals;"quads-ad2" style&equals;"float&colon;none&semi;margin&colon;0px 0 0px 0&semi;text-align&colon;center&semi;">&NewLine;&NewLine;<&sol;div>&NewLine;&NewLine;<p><a href&equals;"http&colon;&sol;&sol;mba-tutorials&period;com&sol;&sol;wp-content&sol;uploads&sol;2010&sol;07&sol;image&period;png"><img style&equals;"display&colon; inline&semi; border&colon; 0px&semi;" title&equals;"image" src&equals;"http&colon;&sol;&sol;mba-tutorials&period;com&sol;&sol;wp-content&sol;uploads&sol;2010&sol;07&sol;image&lowbar;thumb&period;png" border&equals;"0" alt&equals;"image" width&equals;"500" height&equals;"256" &sol;><&sol;a><&sol;p>&NewLine;<p>An important use of amortization is in lease financing&comma; mortgage loans&comma; auto loans&comma; consumer loans&comma; and certain business loans&period; Periodic payment should not necessarily be annually it can monthly&comma; quarterly&comma; semiannually&comma; or annually as per the loan indenture&period;<&sol;p>&NewLine;<p>&lbrack;adsense&rsqb;&NewLine;<&excl;-- WP QUADS Content Ad Plugin v&period; 2&period;0&period;95 -->&NewLine;<div class&equals;"quads-location quads-ad3" id&equals;"quads-ad3" style&equals;"float&colon;none&semi;margin&colon;0px&semi;">&NewLine;&NewLine;<&sol;div>&NewLine;&NewLine;