Question

In: Finance

Today is January 1st, 2017. Pauline just bought a three-bedroom house in the city of Newyork...

Today is January 1st, 2017. Pauline just bought a three-bedroom house in the city of Newyork for $1,000,000. She put down 20% of the house value as deposit, and borrowed the remaining amount from Commonwealth Bank of Australia (CBA). The bank charges a fixed rate of 5.6% per annum on the loan, payable with fixed monthly instalments. The maturity of the loan is 25 years.

  1. What is the amount of monthly payment for this loan?                                 (3 marks)
  2. What are the principal amount and the interest amount in the last instalment? (1+1=2 marks)

Solutions

Expert Solution

Part 1:

Cost of house= $1,000,000      Deposit= 20%

Therefore, net loan amount= $1,000,000*(1-20%) = $ 800,000

Amount of monthly payments= $ 4,960.59 Calculated as follows:

Part 2:

Principal amount of last installment= $4937.55

Interest amount of last installment= $23.04

Relevant portion of amortization schedule is appended below:


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