Question

Suppose that you obtain a ten-year $100,000 loan to purchase a house and the annual interest rate is 7 percent, what should be your monthly payment of principal and interest for the next ten years? (Hint: In the Excel PMT process, convert the annual interest rate and payment periods to the monthly rate and payment periods.)

Answer 1

Present Value, PV of the loan	100000
Annual interest Rate	7%
Monthly interest rate=	7%/12=
	0.00583333
No.of payment period =	10 Yrs.*12=
	120
Using the PV of annuity formula,
we get the monthly payment as the Plug-in value
PV=Pmt.*(1-(1+r)^-n)/r
substituting the values,
100000=Pmt.*(1-(1+0.005833)^-120)/0.005833
Solving ,online , we get the monthly payment as
1161.06
OR
Using the EXCEL function,
PMT function
Under Financial
PMT(7%/12,120,100000,0)
($1,161.08)
So, The ANSWER =
Monthly payment of principal and interest for the next ten years=
1161

answered by: anonymous