Question

Suppose that you are considering the purchase of an apartment building for $2 million.A bank is willing to loan you 85% of the purchase price with a 25 year loan with monthly payments and monthly compounding. If the bank charges you an annual interest rate of 10%. What will be your monthly payment for this loan. Show work

a.10119

b.10373

c.13626

d. 14539

e.15444

Suppose that you are considering the purchase of a house for 300,000. A bank is willing to loan you 75Z% of the purchase price with a 20 year loan with an annual interest rate of 12% with monthly payments and monthly compounding. What will your first 6 payments be for this loan?

a.14865

b.29729

c.31952

d.37030

e.37243

Answer 1

1)	Loan amount =2000000*0.85 =$1700000
	EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
	Where,
	EMI= Equal Monthly Payment
	P= Loan Amount
	R= Interest rate per period =10%/12 =0.83333%
	N= Number of periods =25*12 =300
	= [ $1700000x0.008333333 x (1+0.008333333)^300]/[(1+0.008333333)^300 -1]
	= [ $14166.6661( 1.008333333 )^300] / [(1.008333333 )^300 -1
	=$15444
	Correct Option = $15444
2)	Loan amount = $300000*0.75 =
	=$225000
	EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
	Where,
	EMI= Equal Monthly Payment
	P= Loan Amount
	R= Interest rate per period =12%/12 =1%
	N= Number of periods   =20*12 =240
	= [ $225000x0.01 x (1+0.01)^240]/[(1+0.01)^240 -1]
	= [ $2250( 1.01 )^240] / [(1.01 )^240 -1
	=$2477.44
	Six Month Payment = $2477.44*6
	=$14865
	Correct Option : a)14865
	Please upvote the my answer.