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Consider a hypothetical situation that you wish to start a business. What will you do? How will you gather the necessary capital? If you happen to have enough in savings then it is well and good. But, what happens if it is not? Do you give up your wish? Of course, not! Banks are always there for you in such situations. One aspiring to start a business can get a loan from bank.
You must be wondering why loan is being discussed here. Trust us, knowing it has direct relation with understanding Amortization Homework Solutions. Loan means that a person borrows the required amount from the bank.This is accompanied with a promise to return it within a fixed span of time with interest. And of course, complications and legal issues are raised if the money is not repaid in time.
To prevent such issues, amortizing is an idea that plays vital role. And if a businessman is not savvy with ideas and details of this, then he’ll have troubles with debts, loans and assets. That is why it is so much important in finance syllabi and for writing Amortization Assignment Solutions too. So come let us see what it is all about!
The word ‘Amortize’ comes from the Latin word, ‘admortire’ where ‘mort’ stands for death. Literally, it means ‘to kill’! But here it is not about any criminal activity or homicide. Here by killing, one refers to killing of debts. Formally, it is defined as paying off of monetary amounts that are owed over time by a person of organization. And it is done by careful planning of business and profit margins.This definition is important in Amortization Homework Solutions.
Now let us come to how this is actually carried out in real life.Firstly, we have to know a bit more on interests. It is of two types, simple and compound. In simple interest main amount or principal remains constant.Its formula is given by, Interest= (Principal x rate of interest x time period)/100.
But simple interest is hardly seen to be used nowadays. What we do see is application of compound interest. Here, interest rate is added to the principal each time it is calculated. Its formula is Total Amount = Principal x (1 + interest rate/100) number of compounding. Almost every interest is calculated rather in this way or with some extra feature to this formula.
Having a full knowledge about interest schemes and types is essential for perfect writing Amortization Assignment Solutions.Hence, clearly we have two parts in repaying a loan: principal and interest. In case of compound interest they both vary with time. So while repaying there is a segregation of money to both reduce both this sector, which is the main idea of amortization.
How much of the money should go for the principal and how much for interest must be calculated wisely. Sometimes it is seen that if money is paid mostly to nullify interests then the loan is repayable in shorter times. In other cases, it is found to be wiser to reduce principal as it will in turn reduce interest and will shorten period of loan. Showing these calculations is all about Amortization Homework Solutions.
This is how big industrialists and businessmen repay their debts. They are not all born rich. They plan their profit margins, revenue and business management to incur maximum of what is required. Then they strategically repay parts of their loans and bring down debts to controllable situations.Then they kill them off or ‘amortize’ them, to be precise. This is the basic idea of this topic. And it must reflect in your Amortization Assignment Solutions.
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