Amortization and Amortized Loan

CFA Level II
#1

I understand that Amortization is like depreciation … the decrease in value of an intangible asset.

But I do not find the link between this and Amortized Loan.

Amortized loan is just like a mortgage where there is periodic payment to repay the loan. In what way an intangible asset’s value being reduced?

Thank you

#2

If you make a loan and it’s amortized, a tangible asset’s value is being reduced: every time they make a payment, the principal value (which you show on your balance sheet as an asset) is reduced.

#3

Thanks!!

By the way, what do you do for a living? You seem to know EVERYTHING.

#4

I teach review courses for the CFA exams (all three levels), I consult in project risk management, I teach international finance at a local university, I write software to analyze investment portfolios, and I’m a professional magician.

The usual.