In: Statistics and Probability
How to create the graph? Make a graph of the average life vs the contract rate c, where 0 ? c ? 100% and T=30y. In you submission, show the amortization table for c=5% (and make sure it fits on one page and is annotated)
IN T=30Y , T AND Y ARE UNDEFINED.
1. Steps of making graphs
The average life is the length of time the principal of a debt issue is expected to be outstanding. The average life is an average period before a debt is repaid through amortization or sinking fundpayments.
In an amortization schedule, the percentage of each payment that goes toward interest diminishes a bit with each payment and the percentage that goes toward principal increases.
LETS TAKE AN EXAMPLE OF AMORTIZATION TABLE:-
Month | Month 1 | Month 2 | Month 3 |
Total Payment | $1,266.71 | $1,266.71 | $1,266.71 |
Principal | $329.21 | $330.45 | $331.69 |
Interest | $937.50 | $936.27 | $935.03 |
Total Interest | $937.50 | $1,873.77 | $2,808.79 |
Loan Balance | $249,670.79 | $249,340.34 | $249,008.65 |