Question

Find the unpaid balance on the debt. (Round your answer to the nearest cent.) After 7 years of monthly payments on $150,000 at 4% for 25 years.

Answer 1

We can get unpaid loan if we know future value of monthly payment after 84 months or say 7 years and future value of present loan after 84 months. The difference of the two values will be the unpaid balance.

First, we should know monthly payment:

Using financial calculator BA II Plus - Input details:	#
I/Y = Rate / Compounding frequency = 4/12 =	0.33333333
FV =	$0.00
N = Number of total periods =	300
PV = Present Value =	-$150,000
CPT > PMT = Monthly payment =	$791.76

Calculate the future value of monthly payments at 7^th year:

Using financial calculator BA II Plus - Input details:	#
I/Y = Rate / Compounding frequency = 4/12 =	0.333333333
PV = Present Value =	$0
N = Number payment till 7 years =	84
PMT = Payment	-$791.76
CPT > FV = Future Value of monthly payments =	$76,605.61

Now, Calculate the future value of loan amount at 7^th year:

Using financial calculator BA II Plus - Input details:	#
I/Y = Rate / Compounding frequency = 4/12 =	0.333333333
PV = Present Value =	-$150,000
N = Number payment till 7 years =	84
PMT = Payment	$0.00
CPT > FV = Future Value of loan amount =	$198,377.08

Now, we can get unpaid balance if we do below:

Unpaid debt = Future Value of loan amount - Future Value of monthly payments

Unpaid debt = $198,377.08 - $76,605.61

Unpaid debt = $121,771.47