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Finance Formulas / July 18, 2018 / Rory Wise

The loan payment formula is used to calculate the payments on a loan. The formula used to calculate loan payments is exactly the same as the formula used to calculate payments on an ordinary annuity. A loan, by definition, is an annuity, in that it consists of a series of future periodic payments.

Meanwhile, upset that he is only earning $40 per year, the original investor decides to sell, but to entice others to buy his bond instead of bonds directly from ABC Corporation, he lowers his price. For example, he lowers it to $650, making its effective annual yield $40$650 or 6.15%. If the bond issuer had not increased its rates, the investor might not have had to sell his bond for less than its face value.

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