Final answer:
An amortization table provides important details about a loan including the total interest cost, monthly payment required to pay off the loan, loan's maturity date, and the original principal amount.
Step-by-step explanation:
An amortization table typically shows a breakdown of each periodic payment on a loan (monthly, for example) into the amount that goes towards paying the interest and the amount that goes towards paying down the principal balance. It's a tool used to depict how a loan is paid off over time.
For a $1,000 loan, an amortization table would show a) the total interest cost accumulated over the life of the loan b) the monthly payment required to amortize the loan which includes both principal and interest c) the loan's maturity date or when the loan will be completely paid off, and d) the loan's original principal amount, which is the amount borrowed.
Using the amortization table for various calculations, such as finding the monthly payment on a $1,000,000 house loan at a 6% interest rate for 30 years, is crucial. One would find that the monthly payment is $5,995.51, resulting in a total paid much more than the original loan amount. Similarly, for different interest rates and payment amounts, the amortization table can be used to calculate variables like total interest paid or time to payoff.