Question

Calculate the total interest paid in year 7 for the following real estate loan...

20 years

4.00% interest rate

$4470000 purchase price

80% loan to value

Answer 1

Purchase price = 4,470,000

Loan value = 0.8*4,470,000 = 3,576,000

Interest rate = 4%

Time = 20 years

Annual Installment to be paid = PMT(rate,nper,pv) in excel = PMT(0.04,40,3576000) = 263,128.34

The amortization table is as shown below to calculate the interest in 7th year:

Year	Payment	Interest	Principal	Outstanding
0				$ 35,76,000.00
1	$ 2,63,128.34	$ 1,43,040.00	$ 1,20,088.34	$ 34,55,911.66
2	$ 2,63,128.34	$ 1,38,236.47	$ 1,24,891.87	$ 33,31,019.79
3	$ 2,63,128.34	$ 1,33,240.79	$ 1,29,887.55	$ 32,01,132.24
4	$ 2,63,128.34	$ 1,28,045.29	$ 1,35,083.05	$ 30,66,049.19
5	$ 2,63,128.34	$ 1,22,641.97	$ 1,40,486.37	$ 29,25,562.82
6	$ 2,63,128.34	$ 1,17,022.51	$ 1,46,105.83	$ 27,79,456.99
7	$ 2,63,128.34	$ 1,11,178.28	$ 1,51,950.06	$ 26,27,506.93

As per the table, the total interest paid in the 7th year = $111,178.28