Question

Suppose that you are considering a conventional, fixed-rate 30-year mortgage loan for $100,000. The lender quotes an APR of 5.78%, compounded monthly; mortgage payments would be monthly, beginning one month after the closing on your home purchase. After 6 years of payments, what is the balance outstanding on your loan? Do not round at intermediate steps in your calculation. Round your answer to the nearest penny. Do not type the $ symbol.

Answer 1

Information provided:

Present value= $100,000

Time= 30 years*12= 360 months

Interest rate= 5.78%/12= 0.4817% per month

The question is solved by first computing the amount of monthly payment.

Enter the below in a financial calculator to compute the amount of monthly payment:

PV= -100,000

N= 360

I/Y= 0.4817

Press the CPT key and PMT to compute the amount of monthly payment.

The value obtained is 585.48.

The amount of monthly payment is $585.48.

The amount outstanding on the loan after 6 payments is:

= $100,000 - 6*$585.48

= $100,000 – 3,512.88

= $96,487.12    $96,487.