Final answer:
An amortized loan is a loan that is repaid in equal periodic amounts over a specified period of time. Each payment includes both principal and interest, with the amount of principal gradually increasing and the amount of interest gradually decreasing over time.
Step-by-step explanation:
An amortized loan is a loan that is repaid in equal periodic amounts over a specified period of time. This means that each payment includes both principal and interest, with the amount of principal gradually increasing and the amount of interest gradually decreasing over time.
For example, let's say you have a $300,000 loan with a 6% interest rate convertible monthly and a repayment period of 30 years. To calculate the monthly payments, you can use the formula:
R = PV / [(1-(1+i)^(-n)) / i]
where R is the monthly payment, PV is the loan amount, i is the monthly interest rate, and n is the total number of payments (in this case, 360 for 30 years).
By plugging in the values and solving the equation, you can find the monthly payments for the loan.