Question

For a 30-year house mortgage of $300,000 at 4.8% interest, find the following. (Round your final answers to two decimal places.)

(a) What is the amount of the first monthly payment that goes to repay principal?

(b) What is the amount of the 181st month's payment (after 15 years) that goes toward payment of principal?

Answer 1

Solution :

a) Here, To calculate the first monthly payment we use PPMT function in Excel as follows :

First monthly payment =PPMT(Rate,Per,Nper,PV,FV)

Where,

Rate = 4.8% / 12 = 0.004

Per = 1

Nper = 30 * 12 = 360

PV = - 300000

FV = 0

Now,

First monthly payment =PPMT(0.004,1,360,-300000,0)

First monthly payment = $ 374.00

b) Here, To calculate the 181st month's payment we use PPMT function in Excel as follows :

181st month's payment =PPMT(Rate,Per,Nper,PV,FV)

Where,

Rate = 4.8% / 12 = 0.004

Per = 181

Nper = 30 * 12 = 360

PV = - 300000

FV = 0

Now,

181st month's payment =PPMT(0.004,181,360,-300000,0)

181st month's payment = $ 767.25