Question

Consider a 15-year, $130,000 mortgage with an interest rate of 5.95 percent. After six years, the borrower (the mortgage issuer) pays it off. How much will the lender receive? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answer 1

PV of annuity for making pthly payment
P = PMT x (((1-(1 + r) ^- n)) / i)
Where:
P = the present value of an annuity stream
PMT = the dollar amount of each annuity payment
r = the effective interest rate (also known as the discount rate)
i=nominal Interest rate
n = the number of periods in which payments will be made
PV of annuity	P = PMT x (((1-(1 + r) ^- n)) / i)
130000=	Annual Payment * (((1-(1 + 5.95%) ^- 15)) / 5.95%)
130000=	Annual Payment * 9.744
Annual Payment	130000/9.744
Annual Payment	13,342
Amortization schedule
	Principal	Interest	Repayment	Outstanding
1	130,000	7,735	(13,342)	124,393
2	124,393	7,401	(13,342)	118,453
3	118,453	7,048	(13,342)	112,160
4	112,160	6,674	(13,342)	105,492
5	105,492	6,277	(13,342)	98,427
6	98,427	5,856	(13,342)	90,942
Loan pending after 6 years is 90,942