Page 74 - CFA - Day 1 & 2 Course Notes

LOS 6.f: Demonstrate the use of a Session Unit 2: The Time Value of Money
time line in modelling and solving

time value of money problems..

Example: Constructing an amortization schedule

Construct an amortization schedule to show the interest and principal components of the end-of-year
payments for a 10%, 5-year, $10,000 loan.

Answer: The first step in solving this problem is to compute the amount of the loan payments.
This is done by entering the relevant data and computing PMT:

N = 5; I/Y = 10%; PV = –$10,000; CPT → PMT = $2,637.97