§-Quick questions
TASMathematics ApplicationsUnit 4
Quick questions on Reducing-Balance Loans and Amortisation - TCE Mathematics Applications (Tasmania)
4short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.
What is the amortisation table?Show answer
An amortisation table records, for each period, the interest charged, the principal repaid, and the new balance. It makes the inner workings of each repayment visible.
What is total interest paid?Show answer
The total interest over the life of the loan is the sum of all repayments minus the amount originally borrowed. This is often the figure that surprises borrowers, because over many years the interest can rival the principal.
What is the final repayment?Show answer
The last repayment is usually smaller than the rest, because a full fixed repayment would overshoot and leave a negative balance. The final payment is exactly the outstanding balance plus its final period of interest, clearing the loan to zero.
What is finding the balance owing partway through?Show answer
A subtle exam point, tested in the first question above, is the difference between the value of payments already made and the balance still owing. The balance owing after some payments equals the present value of the payments that remain, so you must use the number of payments left, not the number made. With the finance solver, enter the original loan as , the repayment as , and the number of remaining periods as , then read as the outstanding balance, or solve for using the remaining payments. Confusing payments made with payments remaining is the single most common error in loan questions.
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