Question

# Loan amortization​) To buy a new house you must borrow \$ 165,000 To do this you...

Loan

amortization​)

To buy a new house you must borrow

\$ 165,000

To do this you take out a

\$ 165,000

30-year,

12

percent mortgage. Your mortgage​ payments, which are made at the end of each year​ (one payment each​ year), include both principal and

12

percent interest on the declining balance. How large will your annual payments​ be?

The amount of your annual payments will be

​\$nothing .

​(Round to the nearest cent)

Annual Loan Payment

The Annual Loan Payment is calculated by using the following formula

Annual Loan Payment = [P x {r (1+r)n} ] / [( 1+r)n – 1]

Loan Amount (P) = \$165,000

Interest Rate (n) = 12% per year

Number of years (n) = 30 Years

Therefore, the Annual Loan Payment = [P x {r (1+r)n} ] / [( 1+r)n – 1]

= [\$165,000 x {0.12 x (1 + 0.12)30}] / [(1 + 0.12)30 – 1]

= [\$165,000 x {0.12 x 29.95992}] / [29.95992 – 1]

= [\$165,000 x 3.595190] / 28.95992

= \$20,483.70 per year

“Hence, the amount of your annual payments will be \$20,483.70”

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