Question

You take a mortgage of $ 300,000 in order to finance the purchase of a property. The bank offers the following loan term: 15-year annual compounding mortgage at a rate of 5%. How much interest do you pay during the 5th year?

a)      $ 28,903

b)      $ 15,000

c)       $ 16,899

d)      $ 12,004

Answer 1

Ans d)      $ 12,004

		P =	Regular Payments
		PV =	Loan Amount
		r =	rate of interest
		n =	no of periods
		P =	r (PV)
			1 - (1 + r )-n
		P =	5%*300000
			1 - (1 / (1 + 5%)^15))
		P =	15000
			0.518982902
		P =	28902.69
	Beginning Balance	Interest	Principal	Ending Balance
1	$300,000.00	$15,000.00	$13,902.69	$286,097.31
2	$286,097.31	$14,304.87	$14,597.82	$271,499.49
3	$271,499.49	$13,574.97	$15,327.71	$256,171.78
4	$256,171.78	$12,808.59	$16,094.10	$240,077.68
5	$240,077.68	$12,003.88	$16,898.80	$223,178.88