Question

5. (a) What are the monthly payments on a 20-year, $200,000 loan having 6% annual interest, compounded monthly? Interest is computed based on the balance at the beginning of each month, and payments are made at the end of eachmonth.

(b) How much must be deposited each month to achieve a balance of $200,000 at the end of 25 years, at 6% annual interest compounded monthly? Deposits are made at the beginning of each month, and interest is paid on the balance at the end of each month.

Answer 1

Question (A)

here loan amount or we can say present value is

PV=200000

r=6% = 0.06

n=12 for monthly compound

t = 20 years

PMT = monthly payment =?

....................monthly payment

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Question (B)

here loan amount or we can say future value is

FV=200000

r=6% = 0.06

n=12 for monthly compound

t = 25 years

PMT = monthly payment =?

....................monthly payment