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Homework answers / question archive / A mortgage of S138,000 is to be repaid by making payments of $1183 at the end of each month

A mortgage of S138,000 is to be repaid by making payments of $1183 at the end of each month

Finance

A mortgage of S138,000 is to be repaid by making payments of $1183 at the end of each month. If interest is 5.61% per annum compounded semi-annually, what is the term of the mortgage? State your answer in years and months (from 0 to 11 months). 
The term of the mortgage is 
year(s) and 
month(s). 
 

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First we calculate Monthly Rate:

Monthly Rate = (1+Semiannual Rate)^(1/6) - 1

= (1+5.61%/2)^(1/6) - 1

Monthly Rate = 0.46213%

 

Now we calculate Number of Periods using NPER Function in Excel:

=nper(rate,pmt,-pv,fv)

Here,

Nper = Number of Periods = ?

Rate = 0.46213%

PMT = $1,183

PV = $138,000

FV = 0

Substituting the values in formula:

=nper(0.46213%,1183,-138000,0)

Nper or Number of Periods = 168 months or 14 years and 0 months.

So, The term of the mortgage is 14 years and 0 months.

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