Erin Casey purchased a home with a $90,000 mortgage at 9 1/2% for 30 years. Calc

Question

Erin Casey purchased a home with a $90,000 mortgage at 9 1/2% for 30 years. Calculate the monthly payment and prepare an amortization schedule for the first four months of Erin's loan.

Payment

Monthly

Monthly

Portion used to

Loan

Number

Payment

Interest

Reduce Principal

Balance

$90,000

1

            

            

            

                  

2

            

            

            

                  

3

            

            

            

                  

4

            

            

            

  

Payment

Monthly

Monthly

Portion used to

Loan

Number

Payment

Interest

Reduce Principal

Balance

$90,000

1

            

            

            

                  

2

            

            

            

                  

3

            

            

            

                  

4

            

            

            

  

Explanation / Answer

The effective annual rate is 9.5%.
Let the effective monthly rate be i%.

Thus.
(1 + i)12 = (1 + 9.5%)
On solving we get i = 0.7592%

Let the monthly payment be M.

Value of Loan = P.V. of future payments
90000 = M*PVA(0.7592%,30*12)
90000 = M*123.0650
M = 731.32

THUS, MONTHLY PAYMENT IS OF $732.

PAYMENT NO. PAYMENT INTEREST PRINCIPAL REDUCED LOAN BALANCE 1 732 683.28 48.72 89951.28 2 732 682.91 49.09 89902.19 3 732 682.54 49.46 89852.73 4 732 682.16 49.84 89802.89

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