Mr. Jones bought a building for $60,000, payable on thefollowing terms: a $10,00

Question

Mr. Jones bought a building for $60,000, payable on thefollowing terms: a $10,000 down payment and a 25 equal annualinstallment payments to include principle and interest of 10percent per annum. Calculate the amount of the installmentpayments. How much of the first year's payment goes towardreducing the principle amount? Mr. Jones bought a building for $60,000, payable on thefollowing terms: a $10,000 down payment and a 25 equal annualinstallment payments to include principle and interest of 10percent per annum. Calculate the amount of the installmentpayments. How much of the first year's payment goes towardreducing the principle amount?

Explanation / Answer

Mortgage Pmt Formula: P = M * [r * (1+r)^n] / [(1+r) ^ n - 1] where r is the monthly interest rate = r_year / 12, M is the totalmortgage amount, n is the number of months, and P is the paymentrequired. Plugging numbers in... r = 10/12 = .0083 P = (60000 - 10000) * [ .0083 * 1.0083^25 ] / [ 1.0083 ^ 25 - 1] =2222.93

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