Amortized Loan Interest and Principal

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An amortized loan is repaid in fixed periodic installments. Each payment includes interest (shown in green) and principal (shown in blue). The interest component is the interest rate times the outstanding principal. It is largest at the beginning of the loan period and gets smaller as the outstanding principal declines.

Contributed by: Fiona Maclachlan (March 2011)
Open content licensed under CC BY-NC-SA




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