Loan Amortization

On the heels of starting the next Financial Algebra chapter on Automobile Ownership, I decided to do a little research into loan amortization schedules. This lesson serves two purposes:

1. Teaching the kids the math and formulas on how loan payments are split between principal and interest, and
2. Showing the students how to use Sheets/Excel to do the math for you

I feel both of these will be valuable skills that they should know. I find too often that students do not know all the advantages of Excel, so if I can show them just a few I'll call that a win!

So,  as I was starting to work the math behind the lesson, I began with the Monthly Payment Formula:

I had to check if this was the monthly payment the loan calculator gave; it was! Next, I started a Google Sheet to begin work for the amortization schedule. Interest was calculated by taking the balance and multiplying it by the "monthly" rate (the rate given is the annual percentage rate so you have to divide that by 12). Principal is found by subtracting the interest from the monthly payment and the balance by taking the previous balance and subtracting that payments principal. So easy to do once you tell Sheets what to do - first payment was done and then you drag the rest down and watch the magic happen!!

I also remembered from my business classes being able to set a formula in Excel to find the payment (not having to input the crazy thing above). So, I used that also to see if it worked - it does. Except that it gave the answer as a negative?? Not sure why, but I'll look into that when I have more time. 

I'm excited for the opportunity to share all this with my class next week. I hope they find this unit enjoyable!!