Question

Determine the payment, excluding taxes, PMI and property insurance,

On a $175,000 loan based on the following terms: (20 points, 5pts each)

a.         Interest Rate: 4.5 %               Term:   15 years

b.         Interest Rate: 5.0 %               Term:   30 years

c.         Provide an amortization table showing all monthly payments for the 15 year loan.

d.         Provide an amortization table showing all monthly payments for the 30 year loan.

Answer 1

Answer a
We can use the present value of annuity formula to calculate monthly loan payment
Present value of annuity = P x {[1 - (1+r)^-n]/r}
Present Value of annuity = Loan amount = $1,75,000
P = Monthly loan payment = ?
r = interest rate per month = 4.5%/12 = 0.00375
n = number of monthly loan payments = 15 years x 12 = 180
175000 = P x {[1 - (1+0.00375)^-180]/0.00375}
175000 = P x 130.7201
P = 1338.74
Monthly Loan payment = $1,338.74
Answer b
We can use the present value of annuity formula to calculate monthly loan payment
Present value of annuity = P x {[1 - (1+r)^-n]/r}
Present Value of annuity = Loan amount = $1,75,000
P = Monthly loan payment = ?
r = interest rate per month = 5%/12 = 0.004167
n = number of monthly loan payments = 30 years x 12 = 360
175000 = P x {[1 - (1+0.004167)^-360]/0.004167}
175000 = P x 186.2816
P = 939.44
Monthly Loan payment = $939.44
Answer c
Loan amortization table
Installment no.	Loan payment	Towards Interest	Towards Principle	Loan outstanding
0				$175,000.00
1	$1,338.74	$656.25	$682.49	$174,317.51
2	$1,338.74	$653.69	$685.05	$173,632.46
3	$1,338.74	$651.12	$687.62	$172,944.84
4	$1,338.74	$648.54	$690.20	$172,254.65
5	$1,338.74	$645.95	$692.79	$171,561.86
drag all cells till 180th installment to get complete table.
Answer d
Loan amortization table
Installment no.	Loan payment	Towards Interest	Towards Principle	Loan outstanding
0				$175,000.00
1	$939.44	$729.17	$210.27	$174,789.73
2	$939.44	$655.46	$283.98	$174,505.75
3	$939.44	$654.40	$285.04	$174,220.70
4	$939.44	$653.33	$286.11	$173,934.59
5	$939.44	$652.25	$287.19	$173,647.41
drag all cells till 360th installment to get complete table.