Question

A loan is to be repaid over 30 years, with month-end repayments of 4,000. If the interest rate is 5.3% p.a. compounded monthly. Calculate the principal paid for year 10. Correct your answer to the nearest cent without any units. (Do not use "$" or "," in your answer. e.g. 12345.67)

Answer 1

Answer :

Calculation of Principal paid for year 10 :

For the purpose of calculation of Principal paid we need to calculate amount of Loan using PV formula :

=PV(rate,nper,pmt)

where rate is the rate per period i.e 5.3% / 12=0.44166667%

nper is the total number of payments i.e 30 * 12 = 360

pmt is periodic monthly payments i.e 4000

=PV(0.44166667%,360,-4000)

Therefore PV will be 720,325

Now for the purpose of Calculation of Principal paid for year 10

=CUMPRINC(rate,nper,pv,startperid,endperiod,type)

where

rate is the rate per period i.e 5.3% / 12=0.44166667%

nper is the total number of payments i.e 30 * 12 = 360

pv is the principal calculated above i.e 720,325

startperiod = 109 (end of year 9 in months)

endperiod = 120 (end of year 10 in month terms)

type 0 as payments are made at the end of each month

=CUMPRINC(0.44166667%,360,720325,109,120,0)

Therefore

Principal paid for year 10 is 16199.90