Question

1. Mr. Smith bought an apartment house with $60,000 cash and a fixed-rate fully-amortizing constant payment mortgage (CPM) of $100,000.  The loan was made at an interest rate of 10 percent and requires monthly payments for 25 years.

1. Complete the following amortization schedule with given information.                                                                                                                              (3 points)

Loan Amount	$ 100,000.00
Annual Interest Rate	10%
Loan Term	25 years

	Beginning Balance	Monthly Payment	Interest	Amortization	Ending Balance
Month 1
Month 2

What would be the outstanding balance after 10 years?   

Answer 1

Answer; Part (A)

Current Monthly Installment Amount =

No of Year = 25 Years

No of period = 25 X 12 = 300 monthly payments

Rate = 10% per annum

Monthly rate = 10 % / 12 = .8333%

Principal Amount = $ 100,000

Formula ; Monthly Installment = = P × r × (1 + r)n/((1 + r)^n - 1)

= 100,000 x .83333% [ (1.0083333)^300/ (1.008333)^300 -1]

= 833.33 x[12.05682545/(12.05682545-1)]

= 833.33 X 1.090441873

= $908.70 Per Month or $$909

Answer Part B

Ramaining Amount After 10 years = Formula

Ramaining Amount =

= 100000*(1.0083333)^120 - 908.70*[(1.008333)^120 - 1]/.008333

= 100000*2.707030752 - 908.70*[2.707030752 - 1]/.008333

= 100000*2.707030752 - 908.70*[1.707030752]/.008333

=270703.0752 - 908.70*204.8445096

=270703.0752-186142.2059

= $84560.87 or $84561