Question

# Show work through excel using formulas: but please actually show each step you use to do...

Show work through excel using formulas: but please actually show each step you use to do it on excel!

1. Assume you have taken out a balloon mortgage loan for \$2,500,000 to finance the purchase of a commercial property. The loan has a term of 5 years, but amortizes over 25 years. Calculate the balloon payment at maturity (Year 5) if the interest rate on this loan is 4.5%.

A. \$5,637.99 B. \$13, 895.82 C. \$2,196,447.59 D. \$2,495,479.19

 Computation of monthly payment EMI = [P x R x (1+R)^N]/[(1+R)^N-1] Where, EMI= Equal Monthly Payment P= Loan Amount R= Interest rate per period N= Number of periods = [ \$2500000x0.00375 x (1+0.00375)^300]/[(1+0.00375)^300 -1] = [ \$9375( 1.00375 )^300] / [(1.00375 )^300 -1 =\$13895.81 Calculation of balloon payment Present Value Of An Annuity = C*[1-(1+i)^-n]/i] Where, C= Cash Flow per period i = interest rate per period n=number of period = \$13895.81[ 1-(1+0.00375)^-240 /0.00375] = \$13895.81[ 1-(1.00375)^-240 /0.00375] = \$13895.81[ (0.5927) ] /0.00375 = \$2,196,447.28

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