Question

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How many monthly payments remain to be paid on an 12% interest rate mortgage with monthly...

How many monthly payments remain to be paid on an 12% interest rate mortgage with monthly payments of $733.76, when the balance outstanding on the mortgage reaches $40,000?

Solutions

Expert Solution

We can find the answer using present value of annuity formula:

Where,
PVA = Present value of annuity
A = Annuity or payment
i = Monthly interest rate
n = Number of monthly payments

When mortgage interest rate is 12%, monthly interest rate (i) = 12% / 12 = 1%

Substituting the values, we get:

Now taking log on both sides, we get:

OR

.

If you want to do it in excel, refer the following:

Remaining Balance of loan 40000
Mortgage rate 12%
Monthly rate 1.00%
Monthly payment 733.76
Number of payments               79

Excel formulas:

jeff jeffy answered 2 years ago
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