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Texas Instruments BA II +


Loan Amortization

The loan amortization function is used to find the remaining balance, principle, and interest paid, of a loan with equal end of the month payments.  A 36 month loan with an initial balance of $20,000 and an effective monthly interest rate of 2.00% will be used. 

Step 1 will be to find the amount of the 36 equal monthly payments.

Clear time value of money memory: 2^nd CLR TVM
Compounding should remain at P/Y = 1 (third row second column), ENTER (first row second column), down arrow (first row fourth column), C/Y = 1.

        Enter Present Value: PV = 20,000+/-
        Enter Future Value: FV = 0
        Enter number of periods: N = 36
        Enter interest rate: i (I/Y) = 2
        Calculate unknown: CPT PMT, answer is $784.657

Another way of doing this problem,
Clear time value of money memory: 2^nd CLR TVM (above the FV key)
Change the compounding: 2nd, P/Y=12 (third row second column), ENTER (first row second column),
down arrow (first row fourth column), C/Y = 12. This is to change from monthly payment to annually payment.

        Enter Present Value: PV = 20,000+/-
        Enter Future Value: FV = 0
        Enter number of periods: N = 36
        Enter interest rate: i (I/Y) = 24
        Calculate unknown: CPT PMT, answer is $784.657

Step 2 will be to find the amount of the 12th payment allocated to interest and the amount allocated to principle.     

2nd Amort (third row third column above the PV key)
P1 = 12 (ENTER, down arrow)
P2 = 12 (ENTER, down arrow)
The screen should now read BAL = -14,840.95, which is the remaining balance of the loan
Press the down arrow again, the screen should now read PRN = 478.27, this is the amount of the payment
assigned to principle.
Press the down arrow again, the screen should now read INT = 306.38, this is the amount of the payment assigned
to pay off interest.

This can be used to find information on any payment in the sequence. Just repeat the process entering different values for P1 and P2.

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Last Updated on 1 May 2002, e-mail any comments to: robert.balik@wmich.edu