 # Partially Amortized Bond with a balloon payment.

Hi All,

Can anybody please advise how to calculate payment in year 1 on a Partially Amotrized Bond with a balloon payment at maturity.

_ Details: _

Principal amount : \$1000

Maturity : 5 years

Balloon payment at maturity : \$200

Coupon rate : 6%

Market interest rate : 6% (constant)

Thanks

Hey there. you can refer to the following for the formula to get the answer you need. Hope this helps.

This is how I arrived to it on BA II plus professional, FV=-800, PV=0, I/Y=6, N=5, CPT PMT=141.92. Add annual interest of \$60 (6% of \$1000) to get \$201.92. Can anyone please confirm if the method is correct?

You’re calculating what annual dollar amount is needed to accumulate to the \$800 required at time 5, which you have correctly calculated as 141.92. In addition, you have to pay the annual coupon of \$60 for a combined total of 201.92. seanwilliam’s formula is also correct: it is using time 0 as the focal date for all TVM calcs, whereas your formula is using time 5 as the focal date. 