Question

24.You plan on purchasing a $650,000 home. You’ll put 20% down and borrow the balance from Santander Bank. You borrow the money on a 30-year loan with an APR of 6.5%. (15 points 4/3/3/3/3)

a.What is your monthly mortgage?

b. Five years later, what is the balance on the loan?

c.In the first five years, how much interest did you pay?

25.XYZ Company borrows $450,000 to purchase a piece of capital equipment. The term of the loan is 20 years at an APR of 6.5%. What is the monthly payment? ( 12 points 3/3/3/3/ each)

After five years, APR falls to 4.75%. How much is the balance due on the loan?

How much of the loan principle has XYZ Company paid off during the first five years?

XYZ realizes the machinery has a longer productive life than originally estimated; what would the loan payment be if it took out a new 20 year loan?

Answer 1

Q24. (a) Loan (PV) = ($650,000*80%) = $520,000, Interest Rate (r) = 6.5%/12 = 0.54% per month, Time (nper)= 30*12 = 360 months, FV= 0

Use excel formula PMT = (Rate, Nper, -PV, FV, Type) = (.54%, 360, -$520,000, 0, 0) = $3,286.75 per month EMI.

Years	EMI (Yearly)	Interest	Principle	Starting Principle	Principle Remaining
1	$39,441.04	$33,800.00	$5,641.04	$520,000.00	$514,358.96
2	$39,441.04	$33,433.33	$6,007.71	$514,358.96	$508,351.24
3	$39,441.04	$33,042.83	$6,398.21	$508,351.24	$501,953.03
4	$39,441.04	$32,626.95	$6,814.10	$501,953.03	$495,138.93
5	$39,441.04	$32,184.03	$7,257.01	$495,138.93	$487,881.92
	Total	$165,087.14	$32,118.08

(b) Balance after 5 years = $487,881.92 and (c) Total 5 years interest = $165,087.14

Note: EMI is calculated ona monthly basis.

25. Use excel formula PMT = (Rate, Nper, -PV, FV, Type) = (.54%, 240, -$450,000, 0, 0) = $3,355.08 per month EMI.