The Smith\'s have just purchased a new piece of property for a summer home for $
ID: 2742828 • Letter: T
Question
The Smith's have just purchased a new piece of property for a summer home for $90,000.00 and they are able to provide a $10,000.00 down payment. The loan is to be amortised over a 10-year period at a 9.0% interest rate and a 5 year term. a) How large is their monthly payment?
b. How much interest will be paid over the entire life of the mortgage?
c) Prepare an amortisation table for the first year loan payments.
d) Use the annuity formula to determine the balance owing after making one year's worth of payments. Does this agree with the amortization schedule in part c)? Why or Why not?
e) What is the value of the outstanding principal (amount owing) after 5 years of payments have been made?
f) At the end of the 5 year term, interest rates have dropped to 7 percent. What are the new monthly interest payments for the remaining 5 years?
Explanation / Answer
Monthly Payment = PMT(0.0075,120, -80000,0,0) =1013.41
b) How much interest rate over entire life of the loan
Total EMI - Pricipal
= 1013.41*120 -80,000
= 41608.74
3 AMortization table
4) Balance remaining for nine years
PV(0.75%,108,-1013.41,0,0) = 74829 which matches with the remaing amount
Total Loan Amount 80,000 Annual Interest Rate 9% Monthly Interest rate 0.75%Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.