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A company takes out an eight-year
A company takes out an eight-year. $860.000 mortgage on September 1. The interest rate on the mortgage is 5% per year, and blended payments of $10,888 (including both interest and principal) are to be made at the end of each month. The following is an extract from the mortgage amortization table:
Interest Principal Ending Mortgage Balance $ 188 (1) $3.583 $7,305 0.888 3553 (3) 845,360 1.888 3.522 7,366 (6) 1.888 3.492 7.396 830.598
Expert Solution
First lets calculate the monthly rate of interest = 5/12*100
=0.004166666
September
The amount of mortgage on 1st september = 860000
Interest on mortgage (for sept.) = 860000 * 0.004166666 = 3583.33276 or 3583 (rounded off)
Amount of installment = 10,888
Amount of Principal = Installement - Interest = 10,888 - 3583 = 7305
Ending mortage balance (on 30th sept) = 860000 - 7305 = 852695 [Answer for blank 2]
October
The amount of mortgage on 1st october = 852695
Interest on mortgage = 852695 * 0.004166666 = 3552.8952 or 3553 (rounded off) [Answer for blank 3]
Amount of installment = 10,888
Amount of Principal = Installement - Interest = 10,888 - 3553 = 7335 [Answer for blank 4]
Ending mortgage balance = 852695 - 7335 = 845360
November
The amount of mortgage on 1st november = 845360
Interest on mortgage = 845360 * 0.004166666 = 3522.3327 or 3522 (rounded off)
Amount of installment = 10,888
Amount of Principal = Installement - Interest = 10,888 - 3522 = 7366
Ending mortgage balance = 845360 - 7366 = 837994 [Answer for blank 4]
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