Question

7) Given selling price of $150,000; 20% down payment; 13% for 25 years. Calculate:

A. Amount of mortgage C. Interest portion of first payment

B. Monthly payment D. Principal portion of first payment

Answer 1

A) Amount of mortagage = Selling price(1- down payment)

= 150000(1-20%)

=150000(1-0.2)

=150000(0.8)

=120000 $

B) Montly payment = loan/PVIFA(r%,n)

PVIFA(r%,n) = [1-(1/(1+r)^n / r ]
r = interest rate = 13%/12 = 1.08333%
n = no. of installments = 25 x 12 = 300
PVIFA(1.08333%,300) = [1-(1/(1+1.08333%)^300 / 1.08333%]
=[1-(1/(1+0.010833)^300 / 0.010833]
=[1-(1/(1.010833)^300 / 0.010833]
=[1-0.03946 / 0.0108333]
=0.9605/0.0108333
=88.6678
Thus Montly payment = 120000/88.6678
=1353.37$

C) Interest portion of first payment = mortagage amount x Interest rate

= 120000 x 1.08333%

=1300 $

D) Principal portion of first payment = Installment - Interest portion of first payment

= 1353.37 - 1300

=53.37 $