This problem is a complex financial problem that requires several skills, perhap
ID: 2800620 • Letter: T
Question
This problem is a complex financial problem that requires several skills, perhaps some from previous sections.
Clark and Lana take a 30-year home mortgage of $126,000 at 7.8%, compounded monthly. They make their regular monthly payments for 5 years, then decide to pay $1200 per month.
(a) Find their regular monthly payment. (Round your answer to the nearest cent.)
$
(b) Find the unpaid balance when they begin paying the $1200. (Round your answer to the nearest cent.)
$
(c) How many payments of $1200 will it take to pay off the loan? (Round your answer to two decimal places.)
monthly payments
(d) How much interest will they save by paying the loan using the number of payments from part (c)? (Round your answer to the nearest cent.)
$
Explanation / Answer
a. Amount of loan = 126000
Period = 30*12 = 360 months
Rate = 7.8%/12 = 0.65% per month
Regular payments =PMT(0.65%,360,-126000) = 907.04
b. Balance at the end of year 5 = 119564.71 as per loan amortization schedule below
Interest = OPening balance*0.65%.
Principal repayment = Monthly payment- Interest
C. Number of payments can be calculated using Nper formula in excel as =NPER(0.65%,1200,-119564.71)
161 payments
D. Total Interest as per original payment plan = 907.04*12*25 - 119564.71 = 152547.29
Total interest as per 1200 monthly payment = 1200*161- 119564.71 = 73635.29
Saving in interest = $78912
Month Opening balance Payment Interest Principal repayment Balance loan 1 126000 907.04 819 88.04 125911.96 2 125911.96 907.04 818.42774 88.61226 125823.35 3 125823.3477 907.04 817.85176 89.18823969 125734.16 4 125734.1595 907.04 817.272037 89.76796325 125644.39 5 125644.3915 907.04 816.688545 90.35145501 125554.04 6 125554.0401 907.04 816.101261 90.93873947 125463.1 7 125463.1013 907.04 815.510159 91.52984127 125371.57 8 125371.5715 907.04 814.915215 92.12478524 125279.45 9 125279.4467 907.04 814.316404 92.72359635 125186.72 10 125186.7231 907.04 813.7137 93.32629972 125093.4 11 125093.3968 907.04 813.107079 93.93292067 124999.46 12 124999.4639 907.04 812.496515 94.54348465 124904.92 13 124904.9204 907.04 811.881983 95.1580173 124809.76 14 124809.7624 907.04 811.263456 95.77654442 124713.99 15 124713.9859 907.04 810.640908 96.39909196 124617.59 16 124617.5868 907.04 810.014314 97.02568605 124520.56 17 124520.5611 907.04 809.383647 97.65635301 124422.9 18 124422.9047 907.04 808.748881 98.29111931 124324.61 19 124324.6136 907.04 808.109988 98.93001158 124225.68 20 124225.6836 907.04 807.466943 99.57305666 124126.11 21 124126.1105 907.04 806.819718 100.2202815 124025.89 22 124025.8903 907.04 806.168287 100.8717134 123925.02 23 123925.0185 907.04 805.512621 101.5273795 123823.49 24 123823.4912 907.04 804.852693 102.1873075 123721.3 25 123721.3039 907.04 804.188475 102.851525 123618.45 26 123618.4523 907.04 803.51994 103.5200599 123514.93 27 123514.9323 907.04 802.84706 104.1929403 123410.74 28 123410.7393 907.04 802.169806 104.8701944 123305.87 29 123305.8691 907.04 801.488149 105.5518506 123200.32 30 123200.3173 907.04 800.802062 106.2379377 123094.08 31 123094.0793 907.04 800.111516 106.9284843 122987.15 32 122987.1509 907.04 799.416481 107.6235194 122879.53 33 122879.5273 907.04 798.716928 108.3230723 122771.2 34 122771.2043 907.04 798.012828 109.0271723 122662.18 35 122662.1771 907.04 797.304151 109.7358489 122552.44 36 122552.4412 907.04 796.590868 110.4491319 122441.99 37 122441.9921 907.04 795.872949 111.1670512 122330.83 38 122330.8251 907.04 795.150363 111.8896371 122218.94 39 122218.9354 907.04 794.42308 112.6169197 122106.32 40 122106.3185 907.04 793.69107 113.3489297 121992.97 41 121992.9696 907.04 792.954302 114.0856977 121878.88 42 121878.8839 907.04 792.212745 114.8272548 121764.06 43 121764.0566 907.04 791.466368 115.5736319 121648.48 44 121648.483 907.04 790.715139 116.3248605 121532.16 45 121532.1581 907.04 789.959028 117.0809721 121415.08 46 121415.0772 907.04 789.198002 117.8419985 121297.24 47 121297.2352 907.04 788.432029 118.6079714 121178.63 48 121178.6272 907.04 787.661077 119.3789233 121059.25 49 121059.2483 907.04 786.885114 120.1548863 120939.09 50 120939.0934 907.04 786.104107 120.935893 120818.16 51 120818.1575 907.04 785.318024 121.7219763 120696.44 52 120696.4355 907.04 784.526831 122.5131692 120573.92 53 120573.9223 907.04 783.730495 123.3095048 120450.61 54 120450.6128 907.04 782.928983 124.1110166 120326.5 55 120326.5018 907.04 782.122262 124.9177382 120201.58 56 120201.5841 907.04 781.310297 125.7297035 120075.85 57 120075.8544 907.04 780.493053 126.5469465 119949.31 58 119949.3074 907.04 779.670498 127.3695017 119821.94 59 119821.9379 907.04 778.842597 128.1974034 119693.74 60 119693.7405 907.04 778.009313 129.0306866 119564.71Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.