Posted by David Butler on March 31, 2006 at 17:57:32:
Right… this was presented as an “amortizing” note, which has a much different calculation that a straight note (principal and interest all due in 36 months); or an interest-only note (interest paid monthly for 35 months, plus final payment of all principal and last month’s interest due).
Amortized loan or note interest is typically compounded by the payment periods or annually, depending on the terms of the note. For example, if payments are made monthly, interest is compounded monthly. If made quarterly, then interest is compounded quarterly. The cutoff is annually, as that is the maximum calculate period of time.
With the straight note and interest notes, the interest is compounded annually, or no compounding annually - again, depending on the terms of the note.
Good call on picking up a financial calculator! Those little things put some real POWER right at your fingertips! And you’ll find the User Guide that comes with it to be very helpful in providing more in-depth discussion of the points I presented above.
Best wishes for your success, and Many Happy Returns!
David P. Butler