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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. 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).
Expert Solution
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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