A homeowner has five years of monthly payments of $1750 before she has paid off her house

Finance Dec 27, 2020

A homeowner has five years of monthly payments of $1750 before she has paid off her house. If the quoted interest rate is 8% APR, what is the remaining balance on her mortgage?

Expert Solution

Monthly rate = 8% / 12 = 0.66667%

Number of periods = 5 * 12 = 60

Present value = Payments * [1 - 1 / (1 + rate)^periods] / rate

Present value = 1750 * [1 - 1 / (1 + 0.0066667)^60] / 0.0066667

Present value = 1750 * [1 - 0.67121] / 0.0066667

Present value = 1750 * 49.31839

Present value = $86,307.26

remaining balance is $86,307.26

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