Question

1. Assume you want to purchase a building for an outpatient clinic for $1,500,000. You can receive financing of 6% annually for 30 years. What is your monthly payment?

a. $9,813.77

b. $8,003.26

c. $7,080.12

d. none of the above

2. What is the EAR for this loan? Provide an amortization schedule for the loan repayment.

Answer 1

Answer: Option D: None of the Above

Price of Building P=$1500000

Interest rate =6%

Monthly Interest rate r=6%/12=0.5%

N=30*12=360

So Monthly payment A= P*r/(1-(1+r)^-N)

A=1500000*0.5%/(1-(1+0.5%)^-360

A=$8993.26

EAR =(1+0.5%)^12-1=6.17%

Loan Schedule

Interest Contribution for t month = Principle outstanding for t month * 0.5%

Principle contribution for t month = Monthly Payment for t month - Interest contribution for t month

Principle outstanding for t month=Principle outstanding for t-1 month-Principle contribution for t-1 month

Note: Since there is word limit of 65000 so only payment schedule for 5 years has been shown here.

Month	Principle Outstanding	Monthly Payment	Interest Contribution	Principle contribution
1	1500000	8993	7500	1493
2	1498507	8993	7493	1501
3	1497006	8993	7485	1508
4	1495498	8993	7477	1516
5	1493982	8993	7470	1523
6	1492459	8993	7462	1531
7	1490928	8993	7455	1539
8	1489389	8993	7447	1546
9	1487843	8993	7439	1554
10	1486289	8993	7431	1562
11	1484727	8993	7424	1570
12	1483157	8993	7416	1577
13	1481580	8993	7408	1585
14	1479994	8993	7400	1593
15	1478401	8993	7392	1601
16	1476800	8993	7384	1609
17	1475191	8993	7376	1617
18	1473573	8993	7368	1625
19	1471948	8993	7360	1634
20	1470314	8993	7352	1642
21	1468673	8993	7343	1650
22	1467023	8993	7335	1658
23	1465365	8993	7327	1666
24	1463698	8993	7318	1675
25	1462023	8993	7310	1683
26	1460340	8993	7302	1692
27	1458649	8993	7293	1700
28	1456949	8993	7285	1709
29	1455240	8993	7276	1717
30	1453523	8993	7268	1726
31	1451798	8993	7259	1734
32	1450063	8993	7250	1743
33	1448320	8993	7242	1752
34	1446569	8993	7233	1760
35	1444808	8993	7224	1769
36	1443039	8993	7215	1778
37	1441261	8993	7206	1787
38	1439474	8993	7197	1796
39	1437678	8993	7188	1805
40	1435873	8993	7179	1814
41	1434059	8993	7170	1823
42	1432236	8993	7161	1832
43	1430404	8993	7152	1841
44	1428563	8993	7143	1850
45	1426713	8993	7134	1860
46	1424853	8993	7124	1869
47	1422984	8993	7115	1878
48	1421106	8993	7106	1888
49	1419218	8993	7096	1897
50	1417321	8993	7087	1907
51	1415414	8993	7077	1916
52	1413498	8993	7067	1926
53	1411572	8993	7058	1935
54	1409637	8993	7048	1945
55	1407692	8993	7038	1955
56	1405737	8993	7029	1965
57	1403772	8993	7019	1974
58	1401798	8993	7009	1984
59	1399814	8993	6999	1994
60	1397819	8993	6989	2004