Question

You have decided that your company has outgrown the warehouse described in the previous problem. You have received an offer from someone willing to purchase the warehouse for $1,200,000. If you accept this offer, how much money will you have left over from the sale after you have paid off the balance of the loan? As a reminder, the original loan was a 15-year, 6% APR (monthly) loan with monthly payments with an original amount borrowed of $1,500,000. You have just made your 84th payment. for $1,500,000.

Answer 1

PV = Original amount = $1,500,000

n = 15*12 = 180 months

r = monthly interest rate = 6%/12 = 0.5%

Monthly loan payment = [r*PV] / [1 - (1+r)^-n]

= [0.5% * $1,500,000] / [1 - (1+0.5%)^-180]

= $7,500 / 0.592517573

= $12,657.8525

P = Monthly loan payment = $12,657.85

n1 = installments paid = 84 months

Remaining loan balance = P * [1 - (1+r)^-(n-n1)] / r

= $12,657.85 * [1 - (1+0.5%)^-(180-84)] / 0.5%

= $12,657.85 * 0.380476091 / 0.005

= $963,201.858

Remaining loan balance to paid off is $963,201

Amount left over from sale = Sale value - Remaining loan balance

= $1,20,000 - $963,201

= $236,798

Therefore, amount left over from sale is $236,798