Question

The balance of a mortgage loan after 60 months is $138,959. If the interest rate is...

The balance of a mortgage loan after 60 months is $138,959. If the interest rate is 8.50% and the initial

amortisation period is spread over 25 years, what was the original amount of the mortgage loan?

Homework Answers

Answer #1

60 months equals 5 years

Now, there are 25-5 = 20 years remaining for the loan

We first calculate the monthly installments

Using a financial calculator

PV = -138959

FV = 0

N = 240 (20years*12 months = 240 periods)

I/Y = 8.5/12

cpt PMT, we get PMT= 1205.92

Now, we calculate the original amount of the mortgage loan

Using a financial calculator

FV= 0

PMT = 1205.92

N = 300 (25years*12 months = 300periods)

I/Y = 8.5/12

cpt PV, we get PV = 149761.48

Hence, original amount of the mortgage loan = $149761.48

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