Question

A couple who borrow $80,000 for 30 years at 8.4%, compounded monthly, must make monthly payments of $609.47. (a) Find their unpaid balance after 1 year. (Round your answers to the nearest cent.) $ (b) During that first year, how much do they pay towards the principle? (Round your answer to the nearest cent.) $ During that first year, what are their total payments? (Round your answer to the nearest cent.) $ During that first year, how much interest do they pay? (Round your answer to the nearest cent.) $

Answer 1

As shown in the excel image, the instalment value from PMT is found to be 609.47. The rate of interest is 0.7% per month, time period is 360 month. In the formula, the sign of loan amount is taken as negative, since it is inflow of money while instalment payment is outflow.

Each instalment contains interest and principal component. The interest component is equal to the interest per month on the last outstanding amount while the remaining is principle.

a. At the end of 12 months, i.e. one year, their unpaid balance is 79383 from cell I25 in excel

b. Their payment towards the principle is 617.04 from H26. Their total payments are 7313.64 from cell F26 while their total interest payment is 6696.6 from cell G26