Question

What is the monthly repayment for a mortgage of £164,999 over a 20-year period at a 3.5% annual rate of interest if repayments are made at the beginning of each month (annuity due)?

	A.	£875
	B.	£377
	C.	£950
	D.	£1,570
	E.	£1,000

Answer 1

Present value of annuity due = P+(P*((1-(1+r)^-(n-1)/r)

"P" is Periodic Payment at each beginning period = ?

"r" is Monthly rate of Interest = 3.50%/12 = 0.2917%

"n" is No of months is = (20*12) =240

Present value of annuity due = Mortgage amount = 164,999 Euros

164999=P+[P*((1-(1+0.002917)^-(240-1))/0.002917)]

164999=P+[P*171.922606]

172.922606*P=164999

P is = (164999/172.922606)

P is = $ 954.18/. Approx.

Answer is 950 Euros (Nearest answer on rounding off)