You plan to buy a $220,000 house with a 20 year mortgage with a 4.8% nominal ann
ID: 2732792 • Letter: Y
Question
You plan to buy a $220,000 house with a 20 year mortgage with a 4.8% nominal annual rate (=A.P.R.) Payments are monthly, interest is monthly compounded, and you did not make a down payment. Assume you make all payments on time, at the end of the month. Answer the following questions. a) How much is each monthly payment? [2 decimal places] b) How much interest will you pay with (=in) your 75th payment? [2 decimal places] c) Now assume you have made payments such that you only owe $150,000 on the mortgage. You decide to increase your payments by $100 per month. How many payments will it take to pay off your mortgage?
Explanation / Answer
a) How much is each monthly payment?
Monthly Payment A = i*P *(1+i)n / (1+i)n -1
b) How much interest will you pay with (=in) your 75th payment?
Using IPMT function in Excel we can find
=IPMT(0.004,75,240,220000,0)
= $691.77
c) Using NPER function in Excel we can find
Monthly Payments =$1,427.71+ $100 =$1,527.71, PV = $150,000
=NPER(0.004,-1527.71,150000,0)
= 124.9507 or 125 payments
A= $220,000 Monthly interest rate ==4.8%/12 = 0.4% = 0.004 n =20 year = 20 year *12 months = 240 monthsRelated Questions
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