• An amortizing bond is a type in which each payment goes towards both interest and principal.

  • In the early stages of the loan, most of each payment goes to interest, and in the later stages, more interest goes to the principal amount.
  • A 30-year fixed rate mortgage is an example of an amortizing loan.
  • The amortization schedule is used to calculate the percentage of interest and the percentage of principal within each bond payment.
  • Bond premiums and discounts are amortized using two accounting methods: the straight-line method and the effective interest method.