Question

Will has a 31​-year mortgage on a ​$120000 loan for his house in Florida. The interest rate on the loan is 4.8​% per year​ (nominal interest), payable monthly at 0.4​% per month. a. What is​ Will's monthly​ payment? b. If Will doubles his payment from Part​ (a), when will the loan be completely​ repaid? in months?

Answer 1

ANSWER:

A) n = 31 years or 31 * 12 = 372

i = 0.4% per month

loan amount = $120,000

monthly payment = loan amount(a/p,i,n)

monthly payment = 120,000(a/p,0.4%,372)

monthly payment = 120,000 * 0.0052

monthly payment = 620.55

so the monthly payment is $620.55

B) if the payment doubles that is 2 * 620.55 = 1,241.10

loan amount = 120,000

i = 0.4%

loan amount = monthly payment doubled(p/a,i,n)

120,000 = 1,241.1(p/a,0.4%,n)

120,000 / 1,241.1 = (p/a,0.4%,n)

96.69 = (p/a,0.4%,n)

solving in excel  the value of 0.4% is not available in compounding factor table we get that n = 122.49

so the no of months it will be totally repaid is 123 months (122.49 rounded off to the next whole number)