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Calculate the size of the monthly mortgage loan payment if a $121,500 loan at 7% compounded semiannually is to be paid off over 18 years
Calculate the size of the monthly mortgage loan payment if a $121,500 loan at 7% compounded semiannually is to be paid off over 18 years.
Expert Solution
We can calculate the monthly mortgage loan payment by using the following formula in excel:-
=pmt(rate,nper,-pv,fv)
Here,
Pmt = Monthly mortgage loan payment
Rate = 0.575% (monthly)
Nper = 18*12 = 216 periods (monthly)
PV = $121,500
FV = $0
Substituting the values in formula:
= pmt(0.575%,216,-121500,0)
= $983.75
Working note;
EAR = (1+7%/2)^(2/12)-1
= 1.00575 - 1
= 0.575%
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