Question

You plan to purchase a $160,000 house using a 15-year mortgage obtained from your local credit union. The mortgage rate offered to you is 6 percent. You will make a down payment of 10 percent of the purchase price.

a. Calculate your monthly payments on this mortgage.
b. Construct the amortization schedule for the first six payments.
  

A-Calculate your monthly payments on this mortgage. (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))

	Monthly payment

b- Construct the amortization schedule for the first six payments. (Do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16))

	Amortization Schedule for first 6 payments (months) Month Beginning Loan Balance Payment Interest Principal Ending Loan Balance 1 2 3 4 5 6

Answer 1

(a)-Monthly payments on this mortgage.

Loan Amount (P) = $144,000 [$160,000 x 90%]

Monthly Interest Rate (n) = 0.50% [6% / 12 Months]

Number of months (n) = 180 Months [15 Years x 12 months]

Monthly Loan Payment = [P x {r (1+r)ⁿ} ] / [( 1+r)ⁿ – 1]

= [$144,000 x {0.005 x (1 + 0.005)¹⁸⁰}] / [(1 + 0.005)¹⁸⁰ – 1]

= [$144,000 x {0.005 x 2.454093}] / [2.454093 – 1]

= [$144,000 x 0.012270] / 1.454093

= $1,766.95 / 1.454093

= $1,215.15 per month

“Hence, the monthly payments on this mortgage = $1,215.15”

(b)-Loan amortization schedule for the first six payments

Month	Beginning Loan Balance	Payment	Interest at 0.50%	Principal	Ending Loan Balance
1	1,44,000.00	1,215.15	720.00	495.15	1,43,504.85
2	1,43,504.85	1,215.15	717.52	497.63	1,43,007.22
3	1,43,007.22	1,215.15	715.04	500.11	1,42,507.11
4	1,42,507.11	1,215.15	712.54	502.61	1,42,004.50
5	1,42,004.50	1,215.15	710.02	505.13	1,41,499.37
6	1,41,499.37	1,215.15	707.50	507.65	1,40,991.72