Economic Worksheet: Creating An Amortization Schedule Page 2
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1
2Step 3: Calculate the missing information in each row using the steps below.
Step 3a: Calculate the interest component of the payment (Interest Paid) by
multiplying the periodic interest by the remaining principal (from the previous row).
Interest Paid = i * Remaining Principal
0.03 * $10,000= $300
Step 3b: Calculate the Principal Paid by subtracting the Interest Paid from the
Payment Amount.
Principal Repaid = Payment Amount – Interest Paid
$1,845.98 – $300 = $1545.98
Step 3c: Subtract the Principal Paid from the Remaining Principal (in the previous
row).
Remaining Principal = Remaining Principal (from the previous row) – Principal Paid
$10,000 – $1545.98 = $8454.02
Payment
Payment
Interest
Principal
Remaining
Number
Amount
Paid
Paid
Principal
0
0
0
0
$10,000.00
1
1,845.98
300
1545.98
8454.02
2
1,845.98
253.62
1592.36
6861.66
3
1,845.98
205.85
1640.13
5221.53
4
1,845.98
156.65
1689.33
3532.20
5
1,845.98
105.97
1740.01
1792.19
6
1,845.98
53.77
1792.21
-0.02
Total
Step 4: Adjust the last payment.
It often happens that the remaining principal is not exactly 0 after the last payment. This is
because rounding to the nearest penny after each step loses some precision in the answer.
To account for this, the Payment Amount and the Principle Paid columns are adjusted to the
appropriate amount to make the final balance (Remaining Principal) zero.
In our example, the following changes are made in the last payment row:
6
1,845.96
53.77
1792.19
0
Step 5: Sum the totals for Payment Amount, Interest Paid and Principal Paid.
Payment
Payment
Interest
Principal
Remaining
Number
Amount
Paid
Paid
Principal
0
0
0
0
$10,000.00
1
1,845.98
300
1545.98
8454.02
…
…
…
…
…
6
1,845.96
53.77
1792.19
0
Total
11075.86
1075.86
10,000
Tutoring and Learning Centre, George Brown College
2014
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