Question

A mortgage requires payments of $1,000.00 at the end of every month for 25 years. If interest is 6% compounded semi-annually, calculate the principal of the loan.

Select one:

a. $300,000

b. $33,328.64

c. $156,297.23

d. $46,188.41

e. $155,206.86

Answer 1

Interest paid = Beginning balance * Monthly interest rate

Principal = Monthly payment – interest paid

Ending balance = beginning balance – principal paid

Beginning balance = previous Month ending balance

	Monthly rate(M)=	yearly rate/12=	0.50%	Monthly payment=	1000.00
Month	Beginning balance (A)	Monthly payment	Interest = M*A	Principal paid	Ending balance
1	155206.86	1000.00	776.03	223.97	154982.90
2	154982.90	1000.00	774.91	225.09	154757.81
3	154757.81	1000.00	773.79	226.21	154531.60
4	154531.60	1000.00	772.66	227.34	154304.26
5	154304.26	1000.00	771.52	228.48	154075.78
6	154075.78	1000.00	770.38	229.62	153846.16
7	153846.16	1000.00	769.23	230.77	153615.39
8	153615.39	1000.00	768.08	231.92	153383.47
9	153383.47	1000.00	766.92	233.08	153150.39