is there a step by step solution to this problem? You have secured a loan from P
ID: 2744123 • Letter: I
Question
is there a step by step solution to this problem?
You have secured a loan from PNC Bank for two years to build a new business location. The terms of the loan are that you will borrow $125,000 now and an additional $25,000 in one year. Interest of 10 percent APR will be charged on the balance monthly. Since no payments will be made during the 2-year loan, the balance will grow at the 10 percent compounded rate. At the end of the two years, the balance will be converted to a traditional 30-year mortgage at a 6 percent interest rate. What will you be paying as monthly mortgage payments (principal and interest only)
You also secured a loan from Bank of America for two years to build. The terms of the loan are that you will borrow $100,000 now and an additional $50,000 in one year. Interest of 8 percent APR will be charged on the balance monthly. Since no payments will be made during the 2-year loan, the balance will grow. At the end of the two years, the balance will be converted to a traditional 15-year mortgage at a 8 percent interest rate. What will you pay as monthly mortgage payments (principal and interest only)?
Calculate the monthly payments on both loans
Create a spreadsheet with the amortization and payment schedule. Include, Beginning balance, monthly payment, monthly payment towards interest and amount towards principal, total interest paid, and ending balance for both loans.
What do you need to take into consideration when deciding which loan to take.
Explanation / Answer
1) PNC Bank Loan: Loan balance at the end of the 2nd year: = 125000*(1+0.10/12)^24 152549 =25000*(1+0.10/12)^12 27618 Balance at the end or Yr 2 180167 Monthly mortgage payments for 30 years = 180167/pvifa(0.005,360) =180167/166.7916 $ 1,080 1) Bank of Ameraica Loan: Loan balance at the end of the 2nd year: = 100000*(1+0.08/12)^24 117289 =50000*(1+0.08/12)^12 54150 Balance at the end or Yr 2 171439 Monthly mortgage payments for 15 years = 171439/pvifa(0.00667,180) =171439/104.6403 $ 1,638 AMORTIZATION SCHEDULES: PNC Bank Loan: Bank of America Loan Beginning Monthly Ending Beginning Monthly Ending Month Balance payment Interest Principal Total Int Balance Balance payment Interest Principal Total Int Balance 1 180167 1080 901 179 179 179988 171439 1638 1143 495 495 170944 2 179988 1080 900 180 1079 179808 170944 1638 1140 498 1635 170446 3 179808 1080 899 181 1978 179627 170446 1638 1136 502 2771 169944 4 179627 1080 898 182 2876 179445 169944 1638 1133 505 3904 169439 5 179445 1080 897 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