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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