Question

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Ironwood Bank is offering a 30?-year mortgage with an APR of 5.90 % based on monthly...

Ironwood Bank is offering a 30?-year mortgage with an APR of 5.90 % based on monthly compounding. If you plan to borrow $ 165,000?, what will be your monthly? payment?

Expert Solution

Monthly interest rate = 5.9/ 12 = 0.491667% per month

Loan term = 30 * 12 = 360

If the loan amount is P, rate on interest (monthly is r, and loan term is n the EMI will be

EMI = P*r[(1 +r)^n]/ [(1+ r)^n- 1]

Where,

Loan amount (P) = $165000

Time (n) = 360

Interest rate [r] = 0.491667% /period

Let's put all the values in the formula to calculate EMI

EMI = 165000*0.00491667[(1 +0.00491667)^360]/ [(1+ 0.00491667)^360- 1]

= 811.25055[(1.00491667)^360]/ [(1.00491667)^360- 1]

= 811.25055[5.8454533514]/ [5.8454533514- 1]

= 811.25055[5.8454533514]/ [4.8454533514]

= 811.25055[1.20637903772432]

= 978.68

EMI = $978.68

jeff jeffy answered 2 years ago

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