The cost of a tone s financed with a $120,000) 4O year tod rato mortgage at 5% a

Question

The cost of a tone s financed with a $120,000) 4O year tod rato mortgage at 5% a Find the monthly payments and the total interest for the loarn b. Prepare a loan amortization schedule for the first three months of the mortgage a. The monthly payment is s (Do not round untthe tnal answer Then round to the nearest cont as needed ) The total intorest for the loan is (Use the answer trom part a to find this answer Round to the nearest cent as needed) b. Fil out the loan amortication schedule for the first tree months of the mortgage below Payment Number Principal 50040 (Use the answer from part a to find these answers Round to the nearest cent as needed) Enter your answer in each of the answer boxes Save for Later 3 5 6 O W ERTY UO A S D FG H JK

Explanation / Answer

a-1 Calculation of monthly loan payment Using present value of annuity formula , we can calculate the loan monthly payment. PV of annuity = P{[1 - (1+r)^-n]/r} PV of annuity = present value of monthly loan payments = $120000 P = Monthly Loan payment = ? r = rate of interest per month = 5%/12 = 0.004167 n = no.of monthly payments = 40 years * 12 = 480 120000 = P{[1 - (1+0.004167)^-480]/0.004167} 120000 = P*207.38 P = 578.64 The monthly payment is $578.64 a-2 Calculation of total interest for the loan Total interest for the loan = Total Monthly payments - Loan amount = ($578.64*480) - $120000 Total interest for the loan = $1,57,745.24 b Loan amortization schedule Payment Number Interest Principal Loan Balance 1 $500.00 $78.64 $119,921.36 2 $499.67 $78.97 $119,842.39 3 $499.34 $79.30 $119,763.10

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