Question

Derek borrows $310,516.00 to buy a house. He has a 30-year mortgage with a rate of 4.82%. After making 90.00 payments, how much does he owe on the mortgage?

Answer 1

First we need to calculate the monthly payments:

We are given the following information:

Monthly Payment	PMT	To be calculated
Rate of interest	r	4.82%
Number of years	n	30.00
Monthly	frequency	12.00
Loan amount	PV	310516.00

We need to solve the following equation to arrive at the required PMT:

So the PMT is 1632.93

Now we need to create an amortization schedule:

Opening balance = previous year's closing balance
Closing balance = Opening balance+Loan-Principal repayment
PMT is calculated as per the above formula
Interest = 0.0482 /12 x opening balance
Principal repayment = PMT - Interest
So after 90 payments the closing balance is  $268,800.21