Question

A. Martha Williams wants to buy a home priced at $112,500.       The interest rate is 9%, the down payment is 20%, and the       length of the loan is 15 years. Calculate the monthly       payment.
Purchase Price		$112,500.00
Interest Rate		9%
Length of Loan in Years		15
Down Payment Percent		20%
Down Payment
Amount Financed
Units
Factor		10.1427
Monthly Payment

B. Complete the amortization schedule for the first three months of the mortgage.
Month	Monthly Payment	Interest Portion	Principal Portion	Loan Balance
–––––	–––––	–––––	–––––
1
2
3

Answer 1

loan = price*(1-down%) = 112500*(1-0.2)=90000

PVOrdinary Annuity = C*[(1-(1+i/100)^(-n))/(i/100)]

C = Cash flow per period

i = interest rate

n = number of payments

90000= Cash Flow*((1-(1+ 9/1200)^(-15*12))/(9/1200))

Cash Flow = 912.84

	Monthly rate(M)=	yearly rate/12=	0.75%	Monthly payment=	912.84
Month	Beginning balance (A)	Monthly payment	Interest = M*A	Principal paid	Ending balance
1	90000.00	912.84	675.00	237.84	89762.16
2	89762.16	912.84	673.22	239.62	89522.54
3	89522.54	912.84	671.42	241.42	89281.12

Where

Interest paid = Beginning balance * Monthly interest rate

Principal = Monthly payment – interest paid

Ending balance = beginning balance – principal paid

Beginning balance = previous Month ending balance