Question

Kingston Development Corp. purchased a piece of property for $2.73 million. The firm paid a down payment of 10 percent in cash and financed the balance. The loan terms require monthly payments for 30 years at an annual percentage rate of 7.5 percent, compounded monthly. What is the amount of each mortgage payment?

Answer 1

Price = $ 2.73 M

Down Payment = 10% of 2.73 M

= $ 273000

Loan = Price - DOwn Payment

= $ 2457000

EMI :
EMI or Instalment is sum of money due as one of several equal payments for loan/ Mortgage taken today, spread over an agreed period of time.

EMI = Loan / PVAF (r%, n)
PVAF = SUm [ PVF(r%, n) ]
PVF(r%, n) = 1 / ( 1 + r)^n
r = Int rate per period
n = No. of periods

How to calculate PVAF using Excel:
=PV(Rate,NPER,-1)
Rate = Disc Rate
NPER = No.of periods

Particulars	Amount
Loan Amount	$       2,457,000.00
Int rate per Month	0.6250%
No. of Months	360

EMI = Loan Amount / PVAF (r%, n)
Where r is Int rate per Month & n is No. of Months
= $ 2457000 / PVAF (0.0063 , 360)
= $ 2457000 / 143.0176
= $ 17179.7

Monthly Payment required is $ 17179.70