Question

1. You are taking out a $100,000 mortgage loan to be repaid over 25 years in 300 monthly payments.
   1. If the interest rate is 16% per year, what is the amount of the monthly payment?
   2. If you can only afford to pay $1,000 per month, how large a loan could you afford to take?
   3. If you can afford to pay $1,500 per month and need to borrow $100,000, how many months would it take to pay off the mortgage?
   4. If you can pay $1,500 per month, need to borrow $100,000, and want a 25-year mortgage, what is the highest interest rate you can pay?

`````Please show work

Answer 1

a.

Calculating Monthly Payment,

Using TVM Calculation,

PMT = [PV = 100,000, FV = 0, N = 300, I = 0.16/12]

PMT = $1,358.89

b.

Calculating Loan Amount,

Using TVM Calculation,

PV = [FV = 0, PMT = 1,000, N = 300, I = 0.16/12]

PV = $73,589.53

c.

Calculating Time Period,

Using TVM Calculation,

N = [PV = 100,000, PMT = -1,500, FV = 0, I = 0.16/12]

N = 165.89 months

d.

Calculating Interest Rate,

Using TVM Calculation,

I = [PV = 100,000, PMT = -1,500, FV = 0, N = 300]

I = 17.78%