Log on to the personal finance page of www.smartmoney.com and find the mortgage
ID: 2761384 • Letter: L
Question
Log on to the personal finance page of www.smartmoney.com and find the mortgage payment calculator. Assume a 20-year mortgage loan of $100,000 and an interest rate (APR) of 12%. What is the amount of the monthly payment? Check that you get the same answer when using the annuity formula. Now look at how much of the first month's payment goes to reduce the size of the mortgage. How much of the payment by the tenth year? Can you explain why the figure changes? If the interest rate doubles, would you expect the mortgage paymrnt to double? Check whether you are right.
Explanation / Answer
The Mathematical formula for calculating EMI = [P x R x (1+R) ^n] / [(1+R)^ n-1].
P is the principal loan amount,
R rate of interest per month and
N is the the number of monthly instalments.
Putting the values in the formula $ 1,101.09 which is same as calcultion above
At double interestr rate
The mortgage payment does not doubles.
Loan Summary Loan Amount $ 100,000.00 Scheduled Payment $ 1,101.09 Annual Interest Rate 12.00 % Scheduled Number of Payments 240 Loan Period in Years 20 Actual Number of Payments 240 Number of Payments Per Year 12 Total Early Payments $ - Start Date of Loan 1/1/2016 Total Interest $ 164,260.67 Optional Extra Payments $ - Lender Name: PmtNo. Payment Date Beginning Balance Scheduled Payment Extra Payment Total Payment Principal Interest Ending Balance Cumulative Interest 1 2/1/2016 $ 100,000.00 $ 1,101.09 $ - $ 1,101.09 $ 101.09 $ 1,000.00 $ 99,898.91 $ 1,000.00 2 3/1/2016 99,898.91 1,101.09 - 1,101.09 102.10 998.99 99,796.82 1,998.99 3 4/1/2016 99,796.82 1,101.09 - 1,101.09 103.12 997.97 99,693.70 2,996.96 4 5/1/2016 99,693.70 1,101.09 - 1,101.09 104.15 996.94 99,589.55 3,993.89 5 6/1/2016 99,589.55 1,101.09 - 1,101.09 105.19 995.90 99,484.36 4,989.79 6 7/1/2016 99,484.36 1,101.09 - 1,101.09 106.24 994.84 99,378.12 5,984.63 7 8/1/2016 99,378.12 1,101.09 - 1,101.09 107.30 993.78 99,270.81 6,978.41 8 9/1/2016 99,270.81 1,101.09 - 1,101.09 108.38 992.71 99,162.43 7,971.12 9 10/1/2016 99,162.43 1,101.09 - 1,101.09 109.46 991.62 99,052.97 8,962.75 10 11/1/2016 99,052.97 1,101.09 - 1,101.09 110.56 990.53 98,942.42 9,953.28 11 12/1/2016 98,942.42 1,101.09 - 1,101.09 111.66 989.42 98,830.75 10,942.70 12 1/1/2017 98,830.75 1,101.09 - 1,101.09 112.78 988.31 98,717.97 11,931.01 13 2/1/2017 98,717.97 1,101.09 - 1,101.09 113.91 987.18 98,604.07 12,918.19 14 3/1/2017 98,604.07 1,101.09 - 1,101.09 115.05 986.04 98,489.02 13,904.23Related Questions
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