Fifty percent of the purchase price is debt. The debt has an interest rate of 4% per annum and you must repay $25,000 in principal at the end of each year.
Loan Payment / Principal Paid at the end of each year = $25,000
Interest Rate = 4% p.a.
Mortgage Balance (at the time of Sale) = Loan Payment / Interest Rate = $25,000 / 4% = $625,000
Mortgage Recorded at the time of Purchase = Total Balance at year end – Principal paid at year end
= $625,000 - $25,000 = $600,000
1. How much mortgage is recorded at the time of purchase?
The Correct Answer is Option D = $600,000
2. What is your mortgage balance at the time of sale?
The Correct Answer is Option D = $625,000
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