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Alicia Clothing Goods just borrowed $150,000 to build a new shop. The mortgage calls for equal...

Alicia Clothing Goods just borrowed $150,000 to build a new shop. The mortgage calls for equal monthly payments at the end of the month. The loan is for 30 years at an APR of 4.8%.

1. What is the monthly payment?
2. What is the amount of interest payment for your second payment?
3. What is the amount of principal reduction for your second payment?

On a finance calculator, not excel. Can you also show working out to how you got the answer.

Solutions

Expert Solution

1.
PV=-150000
I/Y=4.8%/12
N=12*30
FV=0
CPT PMT=787.00

2.
Step 1: Loan outstanding after first payment
PV=-150000
PMT=787.00
N=1
I/Y=4.8%/12
CPT FV=149813.00

Interest payment=149813.00*4.8%/12=599.25

3.
Principal reduction=787.00-599.25=187.75

jeff jeffy answered 2 years ago
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