2. John borrowed $100,000 to buy a house. His interest rate was a nominal annual

Question

2. John borrowed $100,000 to buy a house. His interest rate was a nominal annual rate of 9% compounded monthly. He was supposed to make level payments P each month for thirty years with the first payment one month after the loan date. John missed his 20h and 21 " payments but made all of the other prior payments. John made his regular payments of P on time for his 22, 23 and 24 payments After his 24hpayment the loan company recomputed his monthly payment to account for his two missed payments. John would repay his loan with level payments X each month for the remaining twenty-eight years of the loan. Calculate X

Explanation / Answer

Loan Borrowed = 100000

Interest rate = 9% per annum

monthly interest rate = 9/12 = 0.75%

monthly installment would be = 804.6226

which can be calculated Present value of 1 @ discounting 0.75% for 360 months = 124.2819

monthly installment = 100000/124.2819

= 804.6226

after 24 months loan amt. would be amortised like below -

as loan amt. would still pending after 24 months = 100221.4

so now again the same calculation PV for 28 years @ 0.75% = 122.504

installment would be = 100221.4 / 122.504

= 818.11

this monthly amt. would be calcualted like as below -

now the loan would be amortised upto pending 28 years like below -

Please note all values are in $.

In case of any clarification please comment.

Months Opening Installement Principal Interest Closing 1 100000 804.6226 54.62262 750 99945.38 2 99945.38 804.6226 55.03229 749.5903 99890.35 3 99890.35 804.6226 55.44503 749.1776 99834.9 4 99834.9 804.6226 55.86087 748.7618 99779.04 5 99779.04 804.6226 56.27982 748.3428 99722.76 6 99722.76 804.6226 56.70192 747.9207 99666.06 7 99666.06 804.6226 57.12719 747.4954 99608.93 8 99608.93 804.6226 57.55564 747.067 99551.37 9 99551.37 804.6226 57.98731 746.6353 99493.39 10 99493.39 804.6226 58.42221 746.2004 99434.97 11 99434.97 804.6226 58.86038 745.7622 99376.1 12 99376.1 804.6226 59.30183 745.3208 99316.8 13 99316.8 804.6226 59.7466 744.876 99257.06 14 99257.06 804.6226 60.19469 744.4279 99196.86 15 99196.86 804.6226 60.64615 743.9765 99136.22 16 99136.22 804.6226 61.101 743.5216 99075.11 17 99075.11 804.6226 61.55926 743.0634 99013.56 18 99013.56 804.6226 62.02095 742.6017 98951.53 19 98951.53 804.6226 62.48611 742.1365 98889.05 20 98889.05 0 741.6679 99630.72 21 99630.72 0 747.2304 100377.9 22 100377.9 804.6226 51.78802 752.8346 100326.2 23 100326.2 804.6226 52.17643 752.4462 100274 24 100274 804.6226 52.56775 752.0549 100221.4

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