Question

*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)

Answer #1

**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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