Amortization Worksheet
This worksheet provides practice problems on amortization schedules, loan payments, and understanding the components of a loan for Grade 11 students.
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Amortization Schedule Practice
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Read each question carefully and provide your answers in the space provided. Show all your work for calculations.
1. Amortization is the process of paying off a debt over time through regular, equal payments. Each payment consists of both and .
2. An amortization schedule details each payment, showing how much goes towards the principal and how much goes towards , and the remaining balance.
3. In the early stages of a loan, a larger portion of the payment typically goes towards , while later payments allocate more towards the .
1. You take out a car loan for $20,000 at an annual interest rate of 6% compounded monthly, over 5 years. Calculate your monthly payment.
2. If your monthly payment is $386.66 for the loan above, how much interest will you pay in the first month?
1. The total amount of interest paid over the life of a loan decreases if the amortization period is extended.
True
False
2. A higher interest rate on a loan will result in a lower monthly payment, assuming the principal and amortization period remain constant.
True
False
Match each term on the left with its correct definition on the right.
1. Principal
a. The process of paying off a debt over time
2. Interest
b. The original amount of money borrowed
3. Amortization
c. The cost of borrowing money
4. Loan Term
d. The length of time over which a loan is repaid
A mortgage of $150,000 is taken out at an annual interest rate of 4.5% compounded semi-annually, over 25 years. The monthly payment is $833.00.
1. Calculate the outstanding principal balance after the first month's payment.
2. If you make an extra payment of $100 each month towards the principal, how would this affect the total interest paid and the loan term?