What is an amortized loan

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Factor Amortized Cost

Expenses, such as brokerage fees -- or, in the case of bonds and similar instruments, earnings -- affect the value of a security over its lifetime. For example, a bond bought at $18 and 2 percent earns $0.72 annually. If the interest is amortized, the bond earns $.06 per month, so its amortized cost -- cost minus earnings -- of the bond drops by $.06 per month. Fees associated with acquiring or divesting the security should also be broken down into monthly increments and added to the amortized cost progression. Understanding and using an amortized cost chart helps you decide whether you're making or losing money on a security over the long run.

Capitalize on Market Value

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