Longer-term loans and negative amortization

In the last exercise, even though the interest rate kept rising, the payment was still high enough to avoid negative amortization. In this exercise, we will see a case where there is negative amortization.

This will be accomplished by changing the payment frequency from monthly to annually. Another method would have been to increase the interest rate at a more rapid pace, but the increases would have needed to be over 5% per period!

Re-enter the PMT() formula and annual interest and principal payments, and watch to see when negative amortization happens!