Question

Please explain the procedure in detail please. It's sample question for corporate finacne class in university...

Please explain the procedure in detail please. It's sample question for corporate finacne class in university

Suppose you will borrow 200,000$ for a mortgage for 20 years, with an interest rate 6%, you will pay debt at the end of the year. please compute

(a) Your installment every year

(b) If you decide to pay all the debt left at the end of tenth year in advance, how much money you should pay?

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Homework Answers

Answer #1

(a) Yearly payment, PMT

PV = 200,000

n = 20

r = 6%

Our installment every year is $17,436.9113957735

(b) To know how much money we should pay if we decide to pay off all the debt outstanding at the end of tenth year, we need to find the present value of remaining payments

Number of payments remaining, n = 20 - 10 = 10

PMT = 17,436.9113957735

r = 6%

We should pay $128,337.1857850915 to clear the debt at the end of 10 years

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