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In this video tutorial, the presenter explains how to prepare an amortization schedule, which relates to the present value of an annuity. Key terms are defined: the principal is the original loan amount, and interest is the lender's charge. An amortized loan involves equal payments that cover both principal and interest, while other loan types include a discount loan, where the full amount is paid at maturity. The focus of this video is on the amortized loan, specifically detailing the creation of an amortization schedule. This schedule outlines the annual interest expense, the reduction of principal each year, and the remaining principal at the end of each period. The tutorial proceeds with a practical exercise.