Home / Money Blog

## How Much Will I Earn?

Photo by Emre Can from Pexels

**THE SCENARIO**
Last time, I talked about a note that a friend wants to sell me. It's one of several, and another is very similar: 10-year, fully amortizing, 12% interest, $30,000 original balance.
**The question:** If I buy that note 22 months after it started and hold it until the very end, how much money in interest will I end up earning? I'll buy the note for the amount that's owed today (22 months after it started).

**THE SOLUTION**
This one has four parts, each of which is straightforward.
**Part 1: Monthly Payments**
N: 120 (The note started out lasting 10 years, which is 10 x 12 = 120 months)
I/YR: 12 (The borrower is paying 12% interest on the note)
PV: -30,000 (The lender originally loaned $30,000 to the borrower)
PMT: (This is what I'm trying to find)
FV: 0 (The note amortizes fully)
**Part 2: Current Owed**
N: 98 (It's now 22 months into the note, which means that there are 120 - 22 = 98 months remaining)
I/YR: 12 (The borrower is paying 12% interest on the note)
PV: (This is what I'm trying to find)
PMT: 430.41 (From part 1)
FV: 0 (The note amortizes fully)
**Part 3: Total Collected**
If I buy the note, the borrower will send me 98 payments of $430.41 (from Part 1). 98 x $430.41 = **$42,180.18**. (When doing this calculation, make sure to type in the 430.41 instead of recalling it from the PMT slot, as the slot has fractional pennies included, which I'm not receiving.)
**Part 4: Total Profit**
If I pay $26,808.59 for the note, and over time it brings in $42,180.18, that means that overall I'll earn $42,180.18 - $26,808.59 = **$15,371.59** in interest income (AKA profit).

Note: You can use any financial calculator to do this problem, but if you want the BEST, you can
get our 10bii
Financial Calculator for iOS, Android, Mac, and Windows!

- Find the monthly payment
- Find the current amount owed
- Find the total payments I'll collect
- Find out how much profit I'll make

The borrower pays **$430.41** each month for this note.

The borrower owes **$26,808.59** after paying on the note for 22 months.

What do you think? Would you buy this note? Why or why not? Can you think of something better to do with $27K than getting 8+ years of an extra $430 every month? Let us know about it in the comments!