Question

A home is purchased for $169050. The homeowner pays $33810 down and finances the balance for 25 years at 7.25% compounded monthly.

Just after 140 payments are made, the loan is refinanced at 5.75% compounded monthly.

a. If the duration of the original loan remains the same, find the size of the new payments rounded up to the next cent.
$  

b. If money is worth 6% compounded monthly to the homeowner, what is the present value of the savings in interest at the time of refinancing?
$  

c. If the homeowner continues with the original payments, find the number of full payments required to pay off the loan.
full payments

d. Find the size of the smaller concluding payment at the end of the next month.
$

Answer 1

1.
=PMT(5.75%/12,12*25-140,-FV(7.25%/12,140,PMT(7.25%/12,12*25,-169050+33810),-169050+33810))=897.029944874216

2.
=PV(6%/12,12*25-140,PMT(5.75%/12,12*25-140,-FV(7.25%/12,140,PMT(7.25%/12,12*25,-169050+33810),-169050+33810))-PMT(7.25%/12,12*25,-169050+33810))=8850.71561330001

3.
=NPER(5.75%/12,PMT(7.25%/12,12*25,-169050+33810),-FV(7.25%/12,140,PMT(7.25%/12,12*25,-169050+33810),-169050+33810))=141.093976645897

141 full payments

4.
=FV(5.75%/12,141,PMT(7.25%/12,12*25,-169050+33810),-FV(7.25%/12,140,PMT(7.25%/12,12*25,-169050+33810),-169050+33810))*(1+5.75%/12)
=92.06349