Loan Amortization | Relationship Between Present Value and Future Value of Annuity Formlae

Generally students approach Loan Amortization problems using Present Value of Annuity formula. In this video, I show how students can also approach such problems using Future Value formulas. This approach is slightly longer because it requires you to first calculate the future value of the loan and then equate that to the future value of an annuity. Nonetheless, the idea here is to help students see that as long as they are consistent in their approach (i.e. thinking of all cash flows in EITHER present value terms, OR thinking of all cash flows in future value terms), they will always get the same answer.
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My name is Atif Ikram. I am a Clinical Professor of Finance at Arizona State University, where I teach courses in Corporate Finance, Personal Finance, Real Estate Finance and Investments (wpcarey.asu.ed....
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Excellent and clear explanations. Thank you, professor. I have been using your videos to teach my daughter high school financial mathematics!