Question

You are considering to buy a house. The current value of the house is $550,000 and the 30-year mortgage rate based on your FICO score is 4.15%. You also decided to buy the house with a $50,000 down payment, What are the repayment of principal and remaining balance in a month 3 respectively?

Please show your work.

a. $701 and $499,299

b. $704 and $498,595

c. $706 and $497,889

d. $704 and $499,299

Answer #1

Loan Amount = PV = $550,000 - $50,000 = $500,000

n = 30*12 = 360 months

r = monthly interest rate = 4.15%/12 = 0.345833333%

Monthly loan payment = [r*PV] /[1 - (1+r)^-n]

= [0.345833333%*$500,000] / [1 - (1+0.345833333%)^-360]

= $1,729.16667 / 0.711439625

= $2,430.5178

Monthly loan payment is $2,430.52

Loan Repayment Schedule |
|||||

Month |
Opening Balance |
Payment |
Interest portion |
Principal Portion |
Closing Balance |

A |
B |
C |
D = B*4.5%/12 |
E = C-D |
F = B-E |

1 | 500000 | 2430.52 | 1729.166667 | 701.3533 | 499298.6 |

2 | 499298.6 | 2430.52 | 1726.741153 | 703.7788 | 498594.9 |

3 | 498594.9 | 2430.52 | 1724.307251 | 706.2127 | 497888.7 |

Therefore, repayment of principal and remaining balancee in momth 3 is respectively is $706 and $497,889

**Option
c** is correct

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