Question

In: Finance

If you borrow $250,000 for 15 years at an APR of 4.5%, what will be the...

If you borrow $250,000 for 15 years at an APR of 4.5%, what will be the remaining loan balance after ten years of making the required minimum monthly payments?

A. $102,584

B. $102,192

C. $391,748

D. $49,192,043

Expert Solution

A. $102,584

Step-1:Calculation of monthly payments

Monthly Payments

=

Loan amount/present value of annuity of 1

=

$ 2,50,000

/

130.7201

=

$ 1,912.48

Working;

Present value of annuity of 1

=

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

Where,

=

(1-(1+0.00375)^-180)/0.00375

i

4.5%/12

=

0.00375

=

130.7201

n

15*12

=

180

Step-2:Calculation of loan balance after 10 years

Loan balance

=

Monthly loan payments*Present value of annuity of 1

=

$ 1,912.48

*

53.63938

=

$ 1,02,584

Working;

Present value of annuity of 1

=

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

Where,

=

(1-(1+0.00375)^-60)/0.00375

i

4.5%/12

=

0.00375

=

53.63938

n

5*12

=

60

Loan balance is the present value of monthly payment.

So, loan balance after 10 years is

$ 1,02,584

jeff jeffy answered 1 year ago

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