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Mr
- Mr. Smith bought an apartment house with $60,000 cash and a fixed-rate fully-amortizing constant payment mortgage (CPM) of $100,000. The loan was made at an interest rate of 10 percent and requires monthly payments for 25 years.
- Complete the following amortization schedule with given information. (3 points)
|
Loan Amount |
$ 100,000.00 |
|
Annual Interest Rate |
10% |
|
Loan Term |
25 years |
|
Beginning Balance |
Monthly Payment |
Interest |
Amortization |
Ending Balance |
|
|
Month 1 |
|||||
|
Month 2 |
What would be the outstanding balance after 10 years?
Expert Solution
Answer; Part (A)
Current Monthly Installment Amount =
No of Year = 25 Years
No of period = 25 X 12 = 300 monthly payments
Rate = 10% per annum
Monthly rate = 10 % / 12 = .8333%
Principal Amount = $ 100,000
Formula ; Monthly Installment = = P × r × (1 + r)n/((1 + r)^n - 1)
= 100,000 x .83333% [ (1.0083333)^300/ (1.008333)^300 -1]
= 833.33 x[12.05682545/(12.05682545-1)]
= 833.33 X 1.090441873
= $908.70 Per Month or $$909
Answer Part B
Ramaining Amount After 10 years = Formula
Ramaining Amount =
= 100000*(1.0083333)^120 - 908.70*[(1.008333)^120 - 1]/.008333
= 100000*2.707030752 - 908.70*[2.707030752 - 1]/.008333
= 100000*2.707030752 - 908.70*[1.707030752]/.008333
=270703.0752 - 908.70*204.8445096
=270703.0752-186142.2059
= $84560.87 or $84561
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