Question

(Loan amortizabon) Mr. Bill S. Preston, Esq. purchased a new house for $160,000. He paid $10.000 down and agreed to pay the rest over the next 25 years in 25 equal end-of-year payments plus 12 percent compound interest on the unpaid balance. What will these equal payments bo? The equal payments will be $ (Round to the nearest cent)

Answer 1

The purchase cost of house is $160,000. The down payment amount is $10,000. Thus, the actual loan amount is $160,000 - $10,000 = $150,000.

The formula to calculate equal payments is given below:

Equal payment = Loan amount 1-(1+i)-n

Substitute $150,000 for loan amount, 12% for i and 25 for n,

150,000 Equal payment = 1-(1+0.12) - 25 0.12

Equal payment = 150,000 0.9411 0.12

Equal payment = 150,000 7.84314

Equal payment = 19, 125 approximately

So, the equal payments amount is equal to $19,125.