Question

Ashley enters a 30 year mortgage for $300,000 at 3.5%. How much interest and how much principal will she pay in the second year of the mortgage and what will be the balance of the mortgage at the end of the second year? Group of answer choices $11,063; $6,450; $288,280 $12,500; $9,000; $282,000 $11,063, $10,000: $280,000 $10,500; $10,000; $280,000

Answer 1

Calculating Monthly Payment,

Using TVM Calculation,

PMT = [PV = 300,000, FV = 0, N = 360, I = 0.035/12]

PMT = $1,347.13

Calculating Loan Balance at the end of Year 1,

FV = [PV = 300,000, PMT = -1,347.13, N = 12, I = 0.035/12]

FV = $294,242.67

Calculating Loan Balance at the end of Year 2,

FV = [PV = 300,000, PMT = -1,347.13, N = 24, I = 0.035/12]

FV = $288,280.56

Principal Paid in 2nd Year = 294,242.67 - 288,280.56 = $5,962.11

Interest paid in 2nd Year = 12(1,347.13) - 5,962.11 = $10,203.45

Balance at the end of Year 2 = $288,280.56