1. Originally Posted by mathceleb
Yes!!! Good work! The formula I gave you is the sum of the series. But for loans with 10, 20, 30, payments, do you really want to be writing up and adding up all those terms that way?

If so, change your 5000 to 2500, and your 1.04 to (1/1.0525).

For instance your loan payments discounted back to time 0 are:

2500/1.0525 + 2500/(1.0525^2) + 2500/(1.0525^3) + ... + 2500/(1.0525^10)
how about the rest of the calculations???

2. i want to calculate it my way can you calculate it for me like that so i understand it please!

3. Step 2: Now that we know our original Loan Amount = 19,072.10, we need the balance of the loan at time 5 after the 5th payment is made.

The formula for outstanding balance on a standard amortization loan is:

Outstanding Balance at time t = Payment * (1 - v^(n-t))/i where v = 1/(1+i).

Using your series formula, n - t = 5, so do a series with a term of 1/1.0525 and use your 2500 as your common term. We only want to do a term of 5.

That is the outstanding balance formula, but for your series, you want to match the 10,749.30.

2500/1.0525 + 2500/(1.0525^2) + 2500/(1.0525^3) + 2500/(1.0525^4) + 2500/(1.0525^5) = 10749.30

Let me know if that makes sense, and you are ready for Step 3.

4. Please can you show it how to do it my way not with your formula i dont get the formula lets do it my way ok?

5. Originally Posted by mathceleb
Step 2: Now that we know our original Loan Amount = 19,072.10, we need the balance of the loan at time 5 after the 5th payment is made.

The formula for outstanding balance on a standard amortization loan is:

Outstanding Balance at time t = Payment * (1 - v^(n-t))/i where v = 1/(1+i).

Using your series formula, n - t = 5, so do a series with a term of 1/1.0525 and use your 2500 as your common term. We only want to do a term of 5.

That is the outstanding balance formula, but for your series, you want to match the 10,749.30.

2500/1.0525 + 2500/(1.0525^2) + 2500/(1.0525^3) + 2500/(1.0525^4) + 2500/(1.0525^5) = 10749.30

Let me know if that makes sense, and you are ready for Step 3.
10749.29848

6. We have our Balance at time 5 of 10749.3. We need to figure out how to pay this loan off in 5 years to make our 10 year deadline from what you said in your problem. Therefore, we have 5 more payments, and interest has now increased to 7.75%

=10479.30/[1/1.0775 +1/(1.0775^2) + 1/(1.0775^3) + 1/(1.0775^4) + 1/(1.0775^5)] = 2674.52

2674.52 - 2500 = 174.52

7. Originally Posted by mathceleb
We have our Balance at time 5 of 10749.3. We need to figure out how to pay this loan off in 5 years to make our 10 year deadline from what you said in your problem. Therefore, we have 5 more payments, and interest has now increased to 7.75%

=10479.30/[1/1.0775 +1/(1.0775^2) + 1/(1.0775^3) + 1/(1.0775^4) + 1/(1.0775^5)] = 2674.52

2674.52 - 2500 = 174.52
hey why do you have it written differently now in part 3???

10479.30/1.0775^5.....10479.30/1.0775)^1 cant you count it like that?

8. Originally Posted by Rambo
hey why do you have it written differently now in part 3???

10479.30/1.0775^5.....10479.30/1.0775)^1 cant you count it like that?

I missed a parentheses. It's below:

10479.30/(1/1.0775 +1/(1.0775^2) + 1/(1.0775^3) + 1/(1.0775^4) + 1/(1.0775^5))

For the payment, you divide Loan Amount by the sum of your discounted present values.

9. Originally Posted by mathceleb
I missed a parentheses. It's below:

10479.30/(1/1.0775 +1/(1.0775^2) + 1/(1.0775^3) + 1/(1.0775^4) + 1/(1.0775^5))

For the payment, you divide Loan Amount by the sum of your discounted present values.
why in (1/1.0775+1) why not only (1.0775)?????????????

10. Typo, here it is:

10749.30/(1/(1.0775^1) + 1/(1.0775^2) + 1/(1.0775^3) + 1/(1.0775^4) + 1/(1.0775^5))

11. why cant i count this like this??? just like i counted the first 5 years with 1,0525????
10479.30/(1.0775^5+1.0775^4+1.0775^3+1.0775^2+1.0775^1=

12. I fixed it above, I hope you saw it.

This time, we are not calculating a present value, but rather, a payment.

Loan = Payment * Present Value factor. Rearranging this, we get:

Payment = Loan / PV Factor.

Make sense?

Step 1 and Step 2 calculated PV's, Step 3 calculates a payment.

13. Originally Posted by mathceleb
I fixed it above, I hope you saw it.

This time, we are not calculating a present value, but rather, a payment.

Loan = Payment * Present Value factor. Rearranging this, we get:

Payment = Loan / PV Factor.

Make sense?

Step 1 and Step 2 calculated PV's, Step 3 calculates a payment.
why are the 1 inside the ( ) what does they do there?

14. by the way isnt it 10749.30?????????????????????

15. Originally Posted by Rambo
by the way isnt it 10749.30?????????????????????
Yes, I went back and corrected that.

Forget the numerator for now of 10749.30. Let's take denominator.

1/(1.0775^1) <----- 6th payment discounted back to time 5
1/(1.0775^2) <----- 7th payment discounted back to time 5
1/(1.0775^3) <----- 8th payment discounted back to time 5
1/(1.0775^4) <----- 9th payment discounted back to time 5
1/(1.0775^5) <----- 10th payment discounted back to time 5