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BUS FP3062 McAndrewVanessa Assessment4 Attempt1

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Running head: COMPOUND INTEREST 1
Compound Interest
Vanessa McAndrew
Capella University

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COMPOUND INTEREST 2
Compound interest
I would prefer interest be compounded monthly on my savings account rather than annually.
Money will earn compound interest when the interest earned is added to the original deposit each
time interest is calculated (Cannelos, 1982). This means I earn interest on interest which will
increase my initial deposit to a higher current amount. The more frequent interest is added to my
balance the faster my savings account will grow.
Amortization schedule
This is a table of loan payments made periodically that shows the amount of principal and
interest that comprise each payment until the loan is paid in full at the end of its term. It is
frequently used in payment of mortgages (Berger, 2006). It allows for low fixed payments thus
making it easier for borrowers to pay it off eventually while at the same time being very
profitable for lenders.
Interest on mortgages
During the early years interest payments makes up a vast amount of the monthly mortgage
payments. This is a large sum and since the interest is tax deductible the tax benefit is largest in
these first years. However, over the years, the portion of the periodic payment that comprises
principal payment rises. With a drop-in interest payment in later years the tax deductible goes
down too as there is a decrease in the amount of debt in terms of mortgage (Glaeser & Shapiro,
2003).
Ordinary annuity and annuity due
Payments made under annuity due occur at the beginning of the period entailing that
payment has to be made first before usage for example rent or lease payment while payment

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Running head: COMPOUND INTEREST Compound Interest Vanessa McAndrew Capella University 1 COMPOUND INTEREST 2 Compound interest I would prefer interest be compounded monthly on my savings account rather than annually. Money will earn compound interest when the interest earned is added to the original deposit each time interest is calculated (Cannelos, 1982). This means I earn interest on interest which will increase my initial deposit to a higher current amount. The more frequent interest is added to my balance the faster my savings account will grow. Amortization schedule This is a table of loan payments made periodically that shows the amount of principal and interest that comprise each payment until the loan is paid in full at the end of its term. It is frequently used in payment of mortgages (Berger, 2006). It allows for low fixed payments thus making it easier for borrowers to pay it off eventually while at the same time being very profitable for lenders. Interest on mortgages During the early years interest payments makes up a vast amount of the monthly mortgage payments. This is a large sum and since the interest is tax deductible the tax benefit is largest in these first years. However, over the years, the portion of the periodic payment that comprises principal payment rises. With a drop-in interest payment in later years the tax deductible goes down too as there is a decrease in the amount of debt in terms of mortgage (Glaeser & Shapiro, 2003). Ordinary annuity ...
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