Question

Assume mortgage rates increase to 7.5 percent (APR) and you borrow $329,000 for 30 years to purchase a house, paid monthly. What will your loan balance be at the end of the first 10 years of payments?

$191,211.58

$207,308.09

$285,555.50

$193,797.93

$192,938.72

Answer 1

Answer : Correct Option is $285555.50

Calculations :

Using CUMPRINC function of Excel we will calculate amount of principal paid in first 10 years

=CUMPRINC(rate,nper,pv,start_period,end_period,type)

where

rate is the rate of interest per period i.e 7.5% / 12

nper is the number of payments i.e 30 * 12 = 360

pv is Amount of Mortgage after Down payment i.e 329000

start_period is 1

end_period is 120 (10*12)

type 0

=-CUMPRINC(7.5%/12,360,329000,1,120,0)

Therefore Principal paid in 10 years is 43444.5

The amount of Loan balance at the end of First 10 years is $285555.50 (329000 - 43444.5)