You purchase a cottage for $170,000. You obtain a 20-year, fixed rate mortgage loan at 12.0%...

You purchase a cottage for $170,000. You obtain a 20-year, fixed rate mortgage loan at 12.0% after paying a down payment of 20%. Of the second month's mortgage payment, how much is interest and how much is applied to the principal? (Round your answers to the nearest cent.)

interest = $

applied to the principal = $

Expert Solution

first we have to compute the monthly payment
put in calculator

FV		0
PV	=-170000*80%	-136000
I	12%/12	1%
N	20*12	240

Compute PMt		$1,497.48

Now we have to prepare 2 period amortization table

period	Beginning value	EMI	Interest	Principal	Ending balance
1	136,000.00	1,497.48	1,360.00	137.48	135,862.52
2	135,862.52	1,497.48	1,358.63	138.85	135,723.67

Therefore,
Interest =	$ 1,358.63
Principal =	$ 138.85

ekkarill92 answered 2 years ago

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