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A borrower purchased a property 15 years ago with a loan for $150,000 with monthly payments...

A borrower purchased a property 15 years ago with a loan for $150,000 with monthly payments for 30 years at 7% interest. Today, mortgagee wishes to sell the loan to an investor. If market interest rates are 5%, how much would the investor be willing to pay for the loan assuming the loan does not allow prepayment?

a.) $75,000

b.) $126,196

c.) $168,646

d.) $179,460

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Answer #1

Calculating Monthly Payment on Loan,

using TVM Calculation,

PMT = [PV = 150,000, FV = 0, N = 360, I= 0.07/12]

PMT = $997.95

After 15 years,

Calculating Value of Loan Payments on 5% rate,

Using TVM Calculation,

PV = [FV = 0, PMT = -997.95, N = 180, I = 0.07/12]

PV = $126,196

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