Question

. Sam borrows $1,000,000 by a mortgage with annual payments over 30 years at a rate of 9.75% per annum interest. What are his annual payments? what is the remaining balance on his loan after 5 years? 15 years?

Answer 1

1

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

C = Cash flow per period

i = interest rate

n = number of payments

1000000= Cash Flow*((1-(1+ 9.75/100)^-30)/(9.75/100))

Cash Flow = 103873.36

2

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

C = Cash flow per period

i = interest rate

n = number of payments

PV= 103873.36*((1-(1+ 9.75/100)^-25)/(9.75/100))

PV = 961283.23

3

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

C = Cash flow per period

i = interest rate

n = number of payments

PV= 103873.36*((1-(1+ 9.75/100)^-15)/(9.75/100))

PV = 801472.51