Example 14 - Interest Only Payments
This example applies to our online demo Time Value of Money Calculator. The C-Value! program for Windows works in a similar way and has a few more features. Note, our online demo TVM calculator is limited to calculations using interest rates between 4.0% and 5.99%
Note:This topic has not been proofed and images need to be added. However, we believe that the steps are complete and accurate.
A "Special Series" , 5 year loan with first year's payments paying only the accrued interest.
- Click the [New] button to clear any previous entries.
- Set "Rounding" to "Ignore" by either:
- clicking on the "Rounding" button on the toolbar;
- clicking on the {Compute} menu choice and select {Rounding...};
- 1) Set "Compounding" to "Monthly"
- 2) Enter 5.625% for the "Nominal Annual Rate".
- 3) Create a "Loan" event in row one of the cash flow input area.
- A) Set the "Date" to November 1, 2004 (02/15/2004)
- B) Set the "Amount" to $94,000.00
- C) Set the "# Periods" to 1.
- 4) Move to the second row of the cash flow input area. Select "Payment" for the "Event" type. Initially, the regular payment amount is unknown.
- A) Set the "Date" to December 1, 2004 (12/01/2004)
- B) Set the "Amount" to "Unknown"
- C) Set the "# Periods" to 12.
- 5) Display the "Special Series Window" by clicking in the second row's right most column under "Special Series...".
- A) Select the "Interest Only" tab at the top of the window.
- B) Be sure "Activate Interest Only series for the currently highlighted event" is checked.
- C) Click [OK]. Notice that the "Amount" column will now say "Interest Only".
- 6) Move to the third row of the cash flow input area. Select "Payment" for the "Event" type. Initially, the regular payment amount is unknown.
- A) Set the "Date" to December 1, 2005 (12/01/2005)
- B) Set the "Amount" to "Unknown"
- C) Set the "# Periods" to 48.
- 7) Calculate the unknown. The result is $2,191.45
- 8) If you want to see a detailed amortization schedule showing how the monthly payment is allocated between principal and interest click on the "Amortization" tab above the input area or press [F4].

Back to the online Time Value of Money Calculator.