MINDTAP Q Search this course 05 HW 3t and tsck 8130,000 mortgage as.art one prmn
ID: 2811652 • Letter: M
Question
MINDTAP Q Search this course 05 HW 3t and tsck 8130,000 mortgage as.art one prmne. The lrear morp-ge has , 12% no i. ¡eerst me, bu he emam pini beginning next June 30. Nest year Jan munt neport on Schedule s of her IRS Form 1040 the amount of was included in the two payments she recelived during the ye lan recelives Round your answer bo the nearest of principal was includec? De net eund intermediate calculations Round your anseer to the nearest How do these values change for the second seyment L The portion of he pertion of the payment that is applied to prindipel increases s sppled to whe the portion of thepayment hat is asplied to principal dec of the peyment that s of the payment that the payment that is oled hroughout the if nat is applied to principal alse ncreases, whle much interest m Round your s 1t the peyments are constant, why does the amount of interest incoe ange over ame the beginning bance, hence ncreases and 5 4 option command commondoptionExplanation / Answer
EMI = P × r × (1 + r) n / {(1 + r) n - 1 }
Where,
P = Principal = $ 50,000
r = rate of interest = 12 % p.a. or 0.12/2 = 0.06 semiannually
n = No. of periods = 10 years x 2 = 20 periods
Equal semiannual payment = $ 50,000 x 0.05 x (1 + 0.06)20 / {(1 + 0.06) 20 -1}
= $ 50,000 x 0.06 x (1.06)20 / {(1.06) 20 -1}
= $ 50,000 x 0.06 x 3.207135472/ (3.207135472-1)
= $ 50,000 x 0.06 x 3.207135472/2.207135472
= $ 50,000 x 0.06 x 1.45307595
= $ 4,359.227849 or $ 4,359.23
a.
Amount of each payment Jan received is $ 4,359.23
b.
Interest in first payment = $ 50,000 x 0.06 = $ 3,000
c.
Principal repayment = $ 4,359.23 - $ 3,000 = $ 1,359.23
d.
Principal of the loan goes on decreasing as loan period proceeds.
So interest amount goes on decreasing for this diminished principal. As each payment are constant, for every successive payment, contribution towards principal goes on increasing.
Hence option I “The portion of payment that is applied to interest declines, while the portion of the payment that is applied to principal increasing” is correct answer.
c.
Interest for 2nd payment = Remaining principal x rate of interest
= ($ 50,000 – $ 1,359.23) x 0.06
= $ 48,640.77 x 0.06 = $ 2,918.44633 or $ 2,918.45
Interest on loan for first year = $ 3,000 + $ 2,918.45 = $ 3,918.45
No, interest will be different for next year.
d.
Some part of the each installment is contributed towards principal of loan, which results in reducing the principal on every successive payment. So interest amount goes on decreasing with remaining principal. On progression of loan period, contribution towards interest decreases and that of principal goes on increasing.
So for the constant periodic payment, interest income changes over time.
Option IInd “As the loan is amortized (paid-off), the beginning balance, hence the interest charge, decline and the repayment of principal increases.” is correct answer
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.