Amortise

woodchip · Post by **woodchip** » Mon Apr 11, 2005 9:15 am

I'm not at my work comp. Can anyone amortise 5000.00
over 20 years at 6% interest and let me know the amount?
Thanks

Plebeian · Post by **Plebeian** » Mon Apr 11, 2005 9:23 am

According to http://ray.met.fsu.edu/cgi-bin/amortize :

Principal borrowed: $5000.00
Annual Payments: 12 Total Payments: 240
Annual interest rate: 6.00% Periodic interest rate: 0.5000%
Regular Payment amount: $35.82 Final Balloon Payment: $0.00

The following results are estimates which do not account for values being rounded to the nearest cent.
Total Repaid: $8596.80
Total Interest Paid: $3596.80
Interest as percentage of Principal: 71.936%

woodchip · Post by **woodchip** » Mon Apr 11, 2005 9:33 am

Thanks Plebian but I was not precise enough in my request. I'm looking for the value of the 5000 in a savings plan and not as a loan. So take the 5000 with interest compounded at 6% per annum for 20 years and find what the end value is.
Even more precise if the 5000 was put into a defined benefit plan in 1986, what would the 5000 be worth today?

Plebeian · Post by **Plebeian** » Mon Apr 11, 2005 10:07 am

Yeah, different request, is that still technically amortization? (My wife's the CPA.) I'll see if I can get a total for savings.

If I'm remembering the interest formulae properly, the total should be $5000 * (1.06 ^ 12), or ~$16036. A savings calculator at my CU gives $16551 for monthly interest at a 6% APY, so should be close.

woodchip · Post by **woodchip** » Mon Apr 11, 2005 11:00 am

Thank you very much.

Iceman · Post by **Iceman** » Mon Apr 11, 2005 11:59 am

See http://www.outfo.org/science/economics/ ... efinition/ for the source ...

F = Future Value
P = Present Value = 5000
i = Interest rate per month = 0.06/12 = 0.005
n = Period = 20*12 = 240

F = P*(1+i)^n = 1.005^240 = 5000*3.310204476 = 16551.02

Admiral Thrawn · Post by **Admiral Thrawn** » Tue Apr 12, 2005 8:28 am

Hypothetical Savings Deposit Schedule
Assumptions
Opening Savings Balance: $5,000.00
Annual Rate of Return : 6.00%
Number of Years: 20
Contribution Each Month : $0.00
Ending Balance: $16,551.02
Years Contributions lYr Total

0 $0.00 $5,000.00
1 $0.00 $5,308.39
2 $0.00 $5,635.80
3 $0.00 $5,983.40
4 $0.00 $6,352.45
5 $0.00 $6,744.25
6 $0.00 $7,160.22
7 $0.00 $7,601.85
8 $0.00 $8,070.71
9 $0.00 $8,568.50
10 $0.00 $9,096.98
11 $0.00 $9,658.07
12 $0.00 $10,253.75
13 $0.00 $10,886.18
14 $0.00 $11,557.62
15 $0.00 $12,270.47
16 $0.00 $13,027.28
17 $0.00 $13,830.78
18 $0.00 $14,683.83
19 $0.00 $15,589.50
20 $0.00 $16,551.02

Admiral Thrawn · Post by **Admiral Thrawn** » Tue Apr 12, 2005 8:29 am

my question is this though. If your going for something as long as 20 years, why are you only doing 6%?

Dedman · Post by **Dedman** » Tue Apr 12, 2005 9:12 am

There could be any number of reasons why. Which one do you want?

woodchip · Post by **woodchip** » Tue Apr 12, 2005 11:50 am

so from 1985 to 2005, what kind of interest average should one calculate from?

Admiral Thrawn · Post by **Admiral Thrawn** » Tue Apr 12, 2005 12:43 pm

Wood, I'm assuming you mean the average interest rate throughout the previous 20 years.

Well, I can't get into too much detail considering that this is the internet and I have restrictions. But high percentage rates have been around for a LONG time. I'm talking rates around 10% and above. The reason why people don't know about them is an educational issue.

And to add to that, if you look back through history. (Price of a mustang, price of stamps, cost of living, etc...) you will see that inflation averages around 6 percent per year. It's always been that way. So, if you saved money below a 6 percent interest rate, you're actually LOSING purchasing power. If your saving at 6%, your keeping up with inflation (good for emergency funds, and other short term needs), but if you are actually looking at earning money, you should look at higher interest rates and there are very safe ways of earning those rates as well. Problem is, your bank is not going to tell you because it's one of the methods that THEY use to make money.

Dedman · Post by **Dedman** » Tue Apr 12, 2005 1:36 pm

Admiral Thrawn wrote:Problem is, your bank is not going to tell you because it's one of the methods that THEY use to make money.

Which is one reason you should NEVER put your money in a bank if your goal is long term capital growth.

Admiral Thrawn · Post by **Admiral Thrawn** » Tue Apr 12, 2005 9:10 pm

Yea, I used to work as 2nd Tier support/Programmer for online banking and taking a principles of banking class was required for everyone there. Man, the stuff I learned was astounding. Banks can be RUTHLESS mofo's. As a matter of fact, 70 percent of a bank's assets is typically tied up in securities. They advertise cd's which are lower than the rate of inflation, and then proceed to out and make money in securities, credit cards, etc...

It's no wonder that we have such a debt problem in this nation among the middle and lower classes.