Question: We receive a mortgage loan of $300,000 for 25 year. 1) If the monthly
ID: 2731297 • Letter: Q
Question
Question:
We receive a mortgage loan of $300,000 for 25 year.
1) If the monthly payment we ought to make to the bank to amortize the loan is 4,000, compute the annual yield.
2) Secondly, compute the remaining amount we still owe the bank, if we pay an additional single sum of $50,000 after 14 years.
3) Thirdly, as part of this computation, find how many more months, we will pay the bank to induce the loan to expire.
4) Fourthly, if we accumulate a lot by year 8 (end of the year), how much would we give additionally to the lender to eliminate the loan?
Please, solve all 4 questions and identify the numbers, for n (number of periods), coupon rate, par value, price of the bond, and et cetera.
Please display the formula you use for all 4 questions and show the work (step by step). The more work you show, it will help me to understand the problem. I need to solve this question for a take home test, so it is important for me.
Explanation / Answer
1)
Annual Yield = rate(nper,pmt,pv,fv)*12
Annual Yield = rate(25*12,4000,-300000,0)*12
Annual Yield = 15.67%
2)
Amount Outstanding after 14 year = fv(rate,nper,pmt,pv) - additional amount paid
Amount Outstanding after 14 year = fv(15.67%/12,14*12,4000,-300000) - 50000
Amount Outstanding after 14 year = $ 200450.93
3)
No of month more to pay the above balance = nper(rate,pmt,pv,fv)
No of month more to pay the above balance = nper(15.67%/12,4000,-200450.93,0)
No of month more to pay the above balance = 81.89
No of month more to pay the above balance = 82 Month approx
4)
Amount we would give additionally to the lender to eliminate the loan at 8 year = pv(rate,nper,pmt,fv)
nper = (25-8)*12 =204
Amount we would give additionally to the lender to eliminate the loan at 8 year = pv(15.67%/12,204,4000,0)
Amount we would give additionally to the lender to eliminate the loan at 8 year = $ 284,603.61
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