Company A purchased a piece of property for $4.5 million. The firm paid a down payment of 20 percent in cash and financed (borrowed) the balance. The loan terms require monthly payments for 20 years at an annual percentage rate of 7.25 percent, compounded monthly. What is the amount of each monthly mortgage payment? Show your work. (Hint: Use the monthly interest rate with at least six decimal places to avoid rounding errors.)
| Cost of property | a | $ 45,00,000 | |||||||||
| Less down payment | b=a*20% | $ 9,00,000 | |||||||||
| Amount borrowed | c=a-b | $ 36,00,000 | |||||||||
| / Present value of annuity of 1 | 126.5181832 | ||||||||||
| Monthly Payment | $ 28,454.41 | ||||||||||
| Working: | |||||||||||
| Present value of annuity of 1 | = | (1-(1+i)^-n)/i | Where, | ||||||||
| = | (1-(1+0.006042)^-240)/0.006042 | i | 7.25%/12 | = | 0.006042 | ||||||
| = | 126.5181832 | n | 20*12 | = | 240 | ||||||
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