On January 1, 2012, your brother\'s business obtained a 30-year amortized mortga
ID: 2620268 • Letter: O
Question
On January 1, 2012, your brother's business obtained a 30-year amortized mortgage loan for $250,000 at a nominal annual rate of 4.35%, with 360 end-of-month payments. The firm can deduct the interest paid for tax purposes. What will the interest deduction in 2016 tax return? ($10,007.56) On January 1, 2012, your brother's business obtained a 30-year amortized mortgage loan for $250,000 at a nominal annual rate of 4.35%, with 360 end-of-month payments. The firm can deduct the interest paid for tax purposes. What will the interest deduction in 2016 tax return? ($10,007.56) On January 1, 2012, your brother's business obtained a 30-year amortized mortgage loan for $250,000 at a nominal annual rate of 4.35%, with 360 end-of-month payments. The firm can deduct the interest paid for tax purposes. What will the interest deduction in 2016 tax return? ($10,007.56)Explanation / Answer
Here PV = $250,000. nper = 30*12 = 360 and rate = 4.35%/12
We can use the "PMT" function in excel.
The syntax will be: PMT(4.35%/12, 360, 250000)
Excel gives us a number of -$1,244.53. This is negative as it is a cash outflow. Thus monthly payment = $1,244.53
The loan amortization table is provided below:
Thus interest paid in 2016 = 842.08+840.63+839.16+837.69+836.22+834.74+833.25+831.76+830.26+828.76+827.26+825.74
= $10,007.56
Caluclations for monthly interest:
For month 1 interest = 4.35%/12*250,000 = $906.25
Amount of principal due at the end of month 1 = 250,000-1244.53+906.25 = 249661.72
Interest for month 2 = 4.35%/12*249661.72 = 905.02
Similarly interest for all the months have been computed.
Date Amount borrowed Interest for the month Payment Principal due 1-Jan-12 250,000.00 906.25 1,244.53 249,661.72 1-Feb-12 249,661.72 905.02 1,244.53 249,322.21 1-Mar-12 249,322.21 903.79 1,244.53 248,981.48 1-Apr-12 248,981.48 902.56 1,244.53 248,639.51 1-May-12 248,639.51 901.32 1,244.53 248,296.30 1-Jun-12 248,296.30 900.07 1,244.53 247,951.84 1-Jul-12 247,951.84 898.83 1,244.53 247,606.14 1-Aug-12 247,606.14 897.57 1,244.53 247,259.18 1-Sep-12 247,259.18 896.31 1,244.53 246,910.96 1-Oct-12 246,910.96 895.05 1,244.53 246,561.49 1-Nov-12 246,561.49 893.79 1,244.53 246,210.74 1-Dec-12 246,210.74 892.51 1,244.53 245,858.73 1-Jan-13 245,858.73 891.24 1,244.53 245,505.44 1-Feb-13 245,505.44 889.96 1,244.53 245,150.86 1-Mar-13 245,150.86 888.67 1,244.53 244,795.01 1-Apr-13 244,795.01 887.38 1,244.53 244,437.86 1-May-13 244,437.86 886.09 1,244.53 244,079.42 1-Jun-13 244,079.42 884.79 1,244.53 243,719.67 1-Jul-13 243,719.67 883.48 1,244.53 243,358.63 1-Aug-13 243,358.63 882.18 1,244.53 242,996.27 1-Sep-13 242,996.27 880.86 1,244.53 242,632.61 1-Oct-13 242,632.61 879.54 1,244.53 242,267.62 1-Nov-13 242,267.62 878.22 1,244.53 241,901.31 1-Dec-13 241,901.31 876.89 1,244.53 241,533.67 1-Jan-14 241,533.67 875.56 1,244.53 241,164.70 1-Feb-14 241,164.70 874.22 1,244.53 240,794.40 1-Mar-14 240,794.40 872.88 1,244.53 240,422.75 1-Apr-14 240,422.75 871.53 1,244.53 240,049.75 1-May-14 240,049.75 870.18 1,244.53 239,675.40 1-Jun-14 239,675.40 868.82 1,244.53 239,299.69 1-Jul-14 239,299.69 867.46 1,244.53 238,922.63 1-Aug-14 238,922.63 866.09 1,244.53 238,544.19 1-Sep-14 238,544.19 864.72 1,244.53 238,164.38 1-Oct-14 238,164.38 863.35 1,244.53 237,783.20 1-Nov-14 237,783.20 861.96 1,244.53 237,400.63 1-Dec-14 237,400.63 860.58 1,244.53 237,016.68 1-Jan-15 237,016.68 859.19 1,244.53 236,631.34 1-Feb-15 236,631.34 857.79 1,244.53 236,244.60 1-Mar-15 236,244.60 856.39 1,244.53 235,856.45 1-Apr-15 235,856.45 854.98 1,244.53 235,466.90 1-May-15 235,466.90 853.57 1,244.53 235,075.94 1-Jun-15 235,075.94 852.15 1,244.53 234,683.56 1-Jul-15 234,683.56 850.73 1,244.53 234,289.76 1-Aug-15 234,289.76 849.30 1,244.53 233,894.53 1-Sep-15 233,894.53 847.87 1,244.53 233,497.87 1-Oct-15 233,497.87 846.43 1,244.53 233,099.77 1-Nov-15 233,099.77 844.99 1,244.53 232,700.23 1-Dec-15 232,700.23 843.54 1,244.53 232,299.24 1-Jan-16 232,299.24 842.08 1,244.53 231,896.79 1-Feb-16 231,896.79 840.63 1,244.53 231,492.89 1-Mar-16 231,492.89 839.16 1,244.53 231,087.52 1-Apr-16 231,087.52 837.69 1,244.53 230,680.68 1-May-16 230,680.68 836.22 1,244.53 230,272.37 1-Jun-16 230,272.37 834.74 1,244.53 229,862.58 1-Jul-16 229,862.58 833.25 1,244.53 229,451.30 1-Aug-16 229,451.30 831.76 1,244.53 229,038.53 1-Sep-16 229,038.53 830.26 1,244.53 228,624.27 1-Oct-16 228,624.27 828.76 1,244.53 228,208.50 1-Nov-16 228,208.50 827.26 1,244.53 227,791.23 1-Dec-16 227,791.23 825.74 1,244.53 227,372.44Related Questions
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