The Math of Simple Debt Amortization

The Math of Simple Debt Amortization Incurring debt and making a series of payments to reduce this debt to nil is something you are very likely to do in your lifetime. Most people make purchases, such as a home or auto, that would only be feasible if we are given sufficient time to pay down the amount of the transaction. This is referred to as amortizing a debt, a term that takes its root from the French term amortir, which is the act of providing death to something. Amortizing a Debt The basic definitions required for someone to understand the concept are:1. Principal: The initial amount of the debt, usually the price of the item purchased.2. Interest Rate: The amount one will pay for the use of someone elses money. Usually expressed as a percentage so that this amount can be expressed for any period of time.3. Time: Essentially the amount of time that will be taken to pay down (eliminate) the debt. Usually expressed in years, but best understood as the number of an interval of payments, i.e., 36 monthly payments.Simple interest calculation follows the formula:​  I PRT, where I InterestP PrincipalR Interest RateT Time. Example of Amortizing a Debt John decides to buy a car. The dealer gives him a price and tells him he can pay on time as long as he makes 36 installments and agrees to pay six percent interest. (6%). The facts are: Agreed price 18,000 for the car, taxes included.3 years or 36 equal payments to pay out the debt.Interest rate of 6%.The first payment will occur 30 days after receiving the loan To simplify the problem, we know the following: 1. The monthly payment will include at least 1/36th of the principal so we can pay off the original debt.2. The monthly payment will also include an interest component that is equal to 1/36 of the total interest.3. Total interest is calculated by looking at a series of varying amounts at a fixed interest rate. Take a look at this chart reflecting our loan scenario. Payment Number Principle Outstanding Interest 0 18000.00 90.00 1 18090.00 90.45 2 17587.50 87.94 3 17085.00 85.43 4 16582.50 82.91 5 16080.00 80.40 6 15577.50 77.89 7 15075.00 75.38 8 14572.50 72.86 9 14070.00 70.35 10 13567.50 67.84 11 13065.00 65.33 12 12562.50 62.81 13 12060.00 60.30 14 11557.50 57.79 15 11055.00 55.28 16 10552.50 52.76 17 10050.00 50.25 18 9547.50 47.74 19 9045.00 45.23 20 8542.50 42.71 21 8040.00 40.20 22 7537.50 37.69 23 7035.00 35.18 24 6532.50 32.66 This table shows the calculation of interest for each month, reflecting the declining balance outstanding due to the principal pay down each month  (1/36 of the balance outstanding at the time of the first payment. In our example 18,090/36 502.50) By totaling the amount of interest and calculating the average, you can arrive at a simple estimation of the payment required to amortize this debt. Averaging will differ from exact because you are paying less than the actual calculated amount of interest for the early payments, which would change the amount of the outstanding balance and therefore the amount of interest calculated for the next period.Understanding the simple effect of interest on an amount in terms of a given time period and realizing that amortization is nothing more then a progressive summary of a series of simple monthly debt calculations should provide a person with a better understanding of loans and mortgages. The math is both simple and complex; calculating the periodic interest is simple but finding the exact periodic payment to amortize the debt is complex.

Definition and Examples of Mondegreens

Definition and Examples of Mondegreens A mondegreen is a word or phrase that results from mishearing or misinterpreting a statement or song lyric.  Also known as an  oronym. The term mondegreen was coined in 1954 by American writer Sylvia Wright and popularized by San Francisco Chronicle columnist Jon Carroll. The term was inspired by Lady Mondegreen, a misinterpretation of the line hae laid him on the green from the Scottish ballad The Bonny Earl o Moray. According to  J. A. Wines, mondegreens often occur because the English language is rich in homophoneswords which may not be the same in origin, spelling or meaning, but which sound the same (Mondegreens: A Book of Mishearings, 2007). Examples and Observations The point about what I shall hereafter call mondegreens, since no one else has thought up a word for them, is that they are better than the original.(Sylvia Wright, The Death of Lady Mondegreen. Harpers, November 1954)Every time you go away/you take a piece of meat with you (for . . . take a piece of me with you, from the Paul Young song Every Time You Go Away)I led the pigeons to the flag (for I pledge allegiance to the flag)Theres a bathroom on the right (for Theres a bad moon on the rise in Bad Moon Rising by Creedence Clearwater Revival)Excuse me while I kiss this guy (for the Jimi Hendrix lyric Excuse me while I kiss the sky)The ants are my friends (for The answer, my friend in Blowing in the Wind by Bob Dylan)I’ll never leave your pizza burning (for I’ll never be your beast of burden by the Rolling Stones)The girl with colitis goes by (for the girl with kaleidoscope eyes in Lucy in the Sky with Diamonds by the Beatles)Dr. Laura, you pickled man-thief (for the Tom Waits lyric doctor, lawyer, beggar-man, thief) Take your pants down, and make it happen (for Take your passion and make it happen in Irene Caras Flashdance)the bright blessed day and the dog said goodnight (for the bright blessed day, the dark sacred night in What a Wonderful World by Louis Armstrong)The girl from Emphysema goes walking (for The girl from Ipanema goes walking in The Girl from Ipanema, as performed by Astrud Gilberto)bow and arrow transplant for bone marrow transplantIm blotto and bravado/Im a scarecrow and a Beatle (for A mulatto, an albino/A mosquito, my libido from Nirvanas Smells Like Teen Spirit)Lucky Jesus (a childs mondegreen for the chain restaurant Chuck E. Cheese)America! America! God is Chef Boyardee (for God shed His grace on thee in America, the Beautiful)You’re the cheese to my pizza mine (for â€Å"You’re the key to my peace of mind from Carol Kings Natural Woman)In love, as in life, one misheard word can be tremendously important. If you tell someone you love them, for instance, you must be absolutely certain that they have replied I love you back and not I love your back before you continue the conversation.(Lemony Snicket, Horseradish: Bitter Truths You Cant Avoid. HarperCollins, 2007) Historical Mondegreens Examine the following mondegreens and give a historical explanation of what changes have occurred. See if you can find other historical mondegreens that have become standard or widespread in English. Earlier/Later1. an ewt (salamander) / a newt2. an ekename (additional name) / a nickname3. for then anes (for the once) / for the nonce4. an otch / a notch5. a naranj / an orange6. another meal / a whole nother meal7. a nouche (brooch) / an ouche8. a napron / an apron9. a naddre (type of snake) / an adder10. would have done / would of done11. spit and image / spitting image12. sam-blind (half-blind) / sand blind13. a let ball (in tennis) / a net ball14. Welsh rabbit / Welsh rarebit (W. Cowan and J. Rakusan, Source Book for Linguistics. John Benjamins, 1998) Misconceptions (1899) A little girl with whom I am acquainted recently asked her mother what a consecrated cross-eye bear was; the explanation of her query being that she had been learning (orally) a hymn commencing: A consecrated cross I bear.(Ward Muir, Misconceptions. The Academy, Sep. 30, 1899)No language, how simple soever, I think, can escape a childs perversion. One said for years, in repeating the Hail, Mary! Blessed art thou, a monk swimming. Another, supposing that life was labour, I presume, ended his prayers with forever endeavour, Amen.(John B. Tabb, Misconceptions. The Academy, Oct. 28, 1899) Pronunciation: MON-de-green