IB Maths AI 1.7 Notes
This page contains our IB Maths AI notes for 1.7. By reading each one of these notes, you will fully cover the content for IB Maths AI 'Use of technology'.
Amortization & annuities
In this section, technology is used to solve financial mathematics problems involving amortization and annuities. The focus is on using a graphic display calculator or spreadsheet to work with loans and regular payments. Amortization is the process of repaying a loan through regular payments over a fixed period of time. Each payment is split into two parts: At the beginning of the loan, a larger part of each payment goes towards interest. As the balance decreases, the interest charged each period becomes smaller, so more of each payment goes towards repaying the principal. A common example is a mortgage or a car loan.
Image description: amortization chart showing loan balance decreasing over time with interest portion shrinking and principal portion increasing.
An annuity is a sequence of equal payments made at regular intervals over a fixed period of time. In this topic, payments are made at the end of each period.
Annuities are often used to model savings plans, pension payments or investment returns. In simple terms:
- amortization usually involves paying money out to clear a debt
- an annuity usually involves receiving money or building up money through regular deposits
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