# Amortization

We know, it sounds like a spell from *Harry Potter*, but it really just refers to paying off debts with a fixed repayment schedule. Excited? It'll be way more useful than learning fake spells, trust us.

Basic Operations | Multiplication and Division |

Language | English Language |

### Transcript

the price right but if we think about how much

each is used well then it's a horse of a

different color So how many times will you wear a

prom dress in life and generally gals We're talking to

you once five times maybe ten times at the absolute

most right so how much did it cost you Per

wearing five hundred bucks Initial gauss divided by ten times

a wearing it is well fifty bucks of wearing And

if you weren't five hours each time you wore the

dress and yet cost ten bucks an hour Well how

about that super expensive bed for two grand Well you

think it'll last a half dozen years and you'll use

it pretty much every night Vacations accepted Well let's say

it last about two thousand nights How much did it

cost for use Yeah the dollars He slept on a

feather heaven for eight hours and hung out on it

for another two doing homework and eating crackers and stuff

So that's Ten hours for a dollar or ten cents

an hour for chief So if you thought about going

that money as if it was alone you took out

to buy that prom dress or bed you'd have amaar

ties There costs over that period at roughly the rates

noted And since you're advertising it over a very short

period of time for the prom dress prom dresses expensive

per hour and vice versa for the bed So what

if there was interest costs involved And you paid everything

down annually Well let's pick just on the prom dress

to illustrate what if you had to borrow that five

hundred bucks from crazy uncle larry the one who talks

to walls he charges you ten percent interest per year

on the dress and you pay it all off of

the end of the year So now the dress cost

you the initial five hundred plus the ten percent interest

Well the real total cost of the dress was actually

five hundred fifty dollars and the cost for wearing it

ten times was fifty five bucks not fifty And the

fancy formula is here Where is the periodic payment in

this case is just a one year period that he

was the principal or five hundred bucks and eyes The

interest rate the ten percent and it's just a one

year period So you're done and that's how you get

to the five hundred fifty bucks And uncle larry is

proud of you He'll be singing your praises all day 00:02:52.818 --> [endTime] long right here on the wall