Given the above excel data, answer the following: 1) Determine outstanding princ

Question

Given the above excel data, answer the following:

1) Determine outstanding principal balance on mortgage loan at the end of year 6.

2) Determine the net future gain or loss (after 6 years) if the condominium price remains unchanged.

Purchase Price $ 600,000.00 Loan Required $ 480,000.00Local Deed Transfer Tax 20.00% 1.50% 1.50% Down Payment Annual Rate Effective Rate Nominal Rate Monthly Rate # of Periods 4.00% 4.04% 3.97% 0.33% 300 Provincial Deed Transfer Tax Closing Costs $ 2,000.00 (A) Monthly Payment = ($2,524.90) Opportunity Costs Down Payment $ 120,000.00 Local Deed Transfer Tax $ 9,000.00 Provincial Deed Transfer Tax $ 9,000.00 Closing Costs$ 2,000.00 Amount of Investment $140,000.00 (B) Monthly Interest (Opp. Cost)462.82 Intial Cost Monthly Comparison We advise rent overbuy because to recover the cost S23,929.90 $ 3,000.00 $ S20,929.90 $3,929.90 of purchasing the condo, the property value would have to appreciate astronomicaly Rent Buy-Rent 3,000.00 $929.90

Explanation / Answer

present value of annuity = payment per period * [ 1 - (1+i)^-n ]/i

1)

PV of 6 years monthly payments

= 2524.90 ( [1-(1+0.33%)^-72]/0.33%

= 161573.28

hence

outstanding principal = intital principal - PV of payments

= 480000 - 161573.28

= 318426.72

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