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In this video, the presenter explains how to prepare an amortization schedule, which utilizes the concept of the present value of an annuity. Key terms are defined, including "principal," the original loan amount, and "interest," the cost charged by the lender. The video focuses on amortized loans, where equal payments cover both principal and interest over time, contrasting them with other loan types like discount loans, where payment occurs at maturity. The amortization schedule displays the annual interest expense, reduction of principal, and remaining balance for an amortized loan. The tutorial proceeds with a practical exercise to illustrate the concept.