Question

Assume that you have just borrowed $120,000 at 14 percent for 25 years and the mortgage loan requires monthly payments. How much will you still owe at the end of 15 years? O $87,112.92 $88,170,55 $90,298.22 $91.877.23 $93,03448

Answer 1

EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
Where,
EMI= Equal Monthly Payment
P= Loan Amount
R= Interest rate per period
N= Number of periods
= [ $120000x0.012 x (1+0.012)^300]/[(1+0.012)^300 -1]
= [ $1399.92( 1.012 )^300] / [(1.012 )^300 -1
=$1444.44
Monthly payment is $1444.51
We need to calculate present value of remaing payments
Reamining payments = 10 years *12 =120
Present Value Of Annuity
= C*[1-(1+i)^-n]/i]
Where,
C= Cash Flow per period
i = interest rate per period
n=number of period
= $1444.51[ 1-(1+0.0116666)^-120 /0.0116666]
= $1444.51[ 1-(1.0116666)^-120 /0.0116666]
= $1444.51[ (0.7514) ] /0.0116666
= $93,034.48