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A lender makes a 100,000 mortgage at 12% interest with monthly payments for 25 years. How...

A lender makes a 100,000 mortgage at 12% interest with monthly payments for 25 years. How much principal will be repaid during the 10th year of the loan? How much interest will be paid during the 10th year of the loan? Show Calculations using a financial calculator. (i.e. I=?, PMT=? etc)

Expert Solution

Mortgage Loan = $100,000

Annual Interest rate = 12%

Monthly Interest rate = 12% / 12

= 1%

Tenure = 25 year or 300 months

Monthly payment on mortgage loan is calculated in excel and screen shot provided below:

Monthly payment on mortgage loan is $1,053.22.

Total outstanding balance after 10 year will be present value of monthly payment of next 15 year (total 25 year). So total outstanding balance after 10 year is calculated in excel and screen shot provided below:

Outstanding balance after 10 year is $87,756.39.

Total principle payment = $100,000 - $87,756.39

= $12,243.61.

Total principle payment upto 10th year is $12,243.61.

Total Interest payment = ($1,053.22 × 10 × 12) - $12,243.61

= $126,386.90 - $12,243.61

= $114,143.29.

Total Interest payment is $114,143.29.

jeff jeffy answered 2 years ago

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