Question

In: Finance

28) John and Peggy recently bought a house. They financed the house with a $229,000, 30-year...

28) John and Peggy recently bought a house. They financed the house with a $229,000, 30-year mortgage with a nominal interest rate of 6.63%. Mortgage payments are made at the end of each month. What total dollar amount of their mortgage payments during the first 4 years will go towards repayment of principal?

$66,025.39

$59,359.34

$10,106.84

$11,059.99

$14,249.02

Expert Solution

$11,059.99

Step-1:Caluclation of monthly payment

Monthly payment

=

Loan amount / Present value of annuity of 1

=

$ 2,29,000

/

156.0935

=

$ 1,467.07

Working:

Present value of annuity of 1

=

(1-(1+i)^-n)/i

Where,

=

(1-(1+0.005525)^-360)/0.005525

i

6.63%/12

=

0.005525

=

156.0935158

n

30*12

=

360

Step-2:Calculation of loan amount balance after 4 years

Loan amount is the present value of monthly payment.

Loan amount at the end of 4 years

=

Monthly payment * Present value of annuity of 1

=

$ 1,467.07

*

148.554686

=

$ 2,17,940.01

Working:

Present value of annuity of 1

=

(1-(1+i)^-n)/i

Where,

=

(1-(1+0.005525)^-312)/0.005525

i

6.63%/12

=

0.005525

=

148.5546858

n

26*12

=

312

Step-3:Calculation of repayment of principal

Repayment of principal

=

Loan amount at the beginning

-

Loan amount after 4 years

=

$ 2,29,000

-

$ 2,17,940.01

=

$ 11,059.99

jeff jeffy answered 1 year ago

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