Question

1. A debt of $10 000.00 with interest at 8% compounded quarterly is to be repaid by equal payments at the end of every three months for two years.

a) Calculate the size of the monthly payments.

b) Construct an amortization table.

c) Calculate the outstanding balance after three payments.

      Amortization Table

Payment Number	Amount Paid	Interest Paid	Principal Repaid	Outstanding Principal Balance
0
1
2
3
4
5
6
7
8

2. Barbara borrowed $12 000.00 from the bank at 9% compounded monthly. The loan is amortized with end-of-month payments over five years.

a) Calculate the interest included in the 20th payment.

b) Calculate the principal repaid in the 36th payment.

c) Construct a partial amortization schedule showing the details of the first two payments, the 20th payment, the 36th payment, and the last two payments.

d) Calculate the totals of amount paid, interest paid, and the principal repaid.

      

Payment Number	Amount Paid	Interest Paid	Principal Repaid	Outstanding Principal Balance
0				$12 000.00
1
2
19
20
35
36

3. A $248 000.00 mortgage amortized by monthly payments over 35 years is renewable after five years. Interest is 8.12% compounded semi-annually.

          a) What is the size of the monthly payments?

          b) How much interest is paid during the first year?

          c) How much of the principal is repaid during the first five-year term?

4. A $180 000.00 mortgage is to be amortized by making monthly payments for 22.5 years. Interest is 7.2% compounded semi-annually for a four-year term.

          a) Compute the size of the monthly payment.

          b) Determine the balance at the end of the four-year term.

c) If the mortgage is renewed for a five-year term at 8.66% compounded semi-annually, what is the size of the monthly payment for the renewal term?

Answer 1

Debt Amount		$              10,000
Interest rate per annum	8%
No of Quarterly Payments	8
Quarterly payment required	pmt(interest rate /4,8,debt amount)
Quarterly payment required	($1,365)
a)The size of monthly payments	($1,365)
b) Amortization Table
Payment No.	Amount paid	Interest paid	Principal Paid	Outstanding principal
0	$                               10,000			$                             10,000
1	$                                  1,365	$                    200	$              1,165	$                               8,835
2	$                                  1,365	$                    177	$              1,188	$                               7,647
3	$                                  1,365	$                    153	$              1,212	$                               6,434
4	$                                  1,365	$                    129	$              1,236	$                               5,198
5	$                                  1,365	$                    104	$              1,261	$                               3,937
6	$                                  1,365	$                      79	$              1,286	$                               2,650
7	$                                  1,365	$                      53	$              1,312	$                               1,338
8	$                                  1,365	$                      27	$              1,338	$                                      -
C) Outstanding Balance after 3 payments =	$                6,434

Debt Amount		$              12,000
Interest rate per annum	9%
Period in months		60
Monthly payment required	pmt(interest rate /12,60,debt amount)
Monthly payment required	($249)
The size of monthly payments	($249)
a)Interest included in 20th Payment	$                      66
b)Principal included in 36th Payment	$                    207

Payment No.	Amount paid	Interest paid	Principal Paid	Outstanding principal
0	$          12,000			$                             12,000
1	$                249	$                  90	$                 159	$                             11,841
2	$                249	$                  89	$                 160	$                             11,681
20	$                249	$                  66	$                 183	$                               8,581
36	$                249	$                  42	$                 207	$                               5,453
59	$                249	$                    4	$                 245	$                                   247
60	$                249	$                    2	$                 247	$                                     (0)

d) Calculate the totals of amount paid, interest paid, and the principal repaid.
Payment No.	Amount paid	Interest paid	Principal Paid	Outstanding principal
0	$    1,200,000			$                       1,200,000
1	$          24,910	$            9,000	$           15,910	$                       1,184,090
2	$          24,910	$            8,881	$           16,029	$                       1,168,061
19	$          24,910	$            6,710	$           18,200	$                           876,411
20	$          24,910	$            6,573	$           18,337	$                           858,074
35	$          24,910	$            4,398	$           20,512	$                           565,925
36	$          24,910	$            4,244	$           20,666	$                           545,259