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

a Current Monthly Mortgage Payment Cost of House          600,000 Less: Down Payment          120,000 Principal          480,000 Rate of Interest 3.97% 0.3308% Per Month Years 25 300 months Monthly Mortgage Payment= =(480000*.3308%*(1+.3308%)^300)/((1+.3308%)^300-1)              2,526 b 73th interest and principal payment total Instalment                  300 Less: Already paid (73-1)                    72 Remaining Instalment (t)                  228 Monthly Payment (PMT)              2,526 Monthly Rate of Interest ( r ) 0.3308% Current Outstanding Principal PV=PMT*(1-(1+r)/t)/r =2526*(1-(1+.3308%)^-228)/.3308%          403,976 2 Gain or Loss if price after six years will remain same Monthly rent              3,000 Monthly Mortgage Payment              2,526 Monthly Saving if buy                  474 Discount Factor for six years            63.917 Pv of the Saving            30,297 Pv of of the condominium price residual value after payment of loan and closing of file Residual inflow(600000-403976-2000)          194,024 Discount Factor 0.787 Pv of of the condominium price          152,697 Pv of the Total Inflow (32297+152697)          182,994 Less Initial Outflow (120000+9000+9000)       (138,000) NPV (Gain)            44,994 Since NPV is positive, So it better to buy the house

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