Loan Amortization Using Present Value of Annuity Formula

Students can use this video to better understand Section 4.5 of "Corporate Finance" [12th Edition] by Ross, Westerfield, Jaffe and Jordan. In this video I explain loan amortization using a numerical example. Specifically, I explain how loan amortization is a simple application of the Present Value of Annuity formula, and how one can, therefore, use this formula to calculate the constant periodic payment that needs to be made to retire the loan (with interest). I also construct a simple loan amortization table to show how the constant payment calculated retires the principal and interest expense overtime.