Question

Complete the following table: (Use Table 15.1) (Do not round intermediate calculations. Round your answers to the nearest cent.)

						First Payment Broken Down Into—
Selling price	Down payment	Amount mortgage	Rate	Years	Monthly payment	Interest	Principal	Balance at end of month
$150,000	$30,000	$120,000	7%	30	$	$	$	$

Answer 1

The formula used to calculate the fixed monthly payment (P) required to fully amortize a loan of L dollars over a term of n months at a monthly interest rate of r is .

P = L[r(1 + r)ⁿ]/[(1 + r)ⁿ - 1]

Here, L = $ 120000, n = 30*12 = 360 and r = 7/1200 .

Hence P = 120000*(7/1200)[(1+7/1200)³⁶⁰]/[ (1+7/1200)³⁶⁰-1] = 700*8.116497466/7.116497466 = $ 798.36 ( on rounding off to the nearest cent). Also, $ 120000/360 = $333.33( on rounding off to the nearest cent). Hence, the amount of principal in the 1^st repayment is $ 333.33 and the amount of interest is $ 798.36 -$333.33 = $ 465.03.The balance laft after this first repayment is $ 120000- $333.33 = $ 119666.67.

						First Payment
Selling Price ($)	Down Payment ($)	Amount Mortgage ($)	Rate (%)	Years	Monthly Payment ($)	Broken down into Interest     Principal ($)                 ($)	Balance at the end of the month($)
150000	30000	120000	7	30	798.36	465.03            333.33	119666.67