pls solve it by using excel.... and expain how the steps ...how to solve ... ty!

Question

pls solve it by using excel.... and expain how the steps ...how to solve ... ty!!!

David's has a mortgage that started 5 years ago. He wants to retire in 15 years and be mortgage free. The original loan was $310,000, with an 9% interest rate and a 30 year and amortization. He can afford to increase his monthly payments by $1200. If he does so, how many months would it take (from now) to pay off the loan with his $1200 increase in his monthly payments? Instead of increasing his monthly payments, David can pay for an interest rate reduction at a cost of $25 per 0.01% of annual rate reduction. How much would it cost Dave to pay for a lower rate that would allow the loan to be repaid in 17 years holding the original payment amounts constant? What would be David's Return on the investment to "Buy Down" the interest rate in above?

Explanation / Answer

(a)

Original monthly installment: Loan = 310000 Interest rate (P.a.) = 9% Time = 30 Years Monthly rate = 0.75% Time in months = 360 Cumulative discount factor = (1-(1+i)^-n)/i = (1-(1.0075)^-360)/.0075 = 124.282 Monthly installment = Laon amount/Cumulative discount factor = 310000/124.282 = $ 2,494 Yearly instaalment = $ 29,931.93

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