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Question 15 (3.3 points) Assume that exactly five years ago I borrowed $417,000. My loan has an interest rate of 4.25% and th
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Answer #1
We would first calculate monthly payment on loan using present value of annuity formula
Present value of annuity Annuity amount*(1-((1+r^-n)/r)
Monthly interest rate 0.00354167 4.25%/12
No of payments 360 30*12
417000 Annuity amount*(1-((1.003542^-360)/0.003542)
417000 Annuity amount*203.2769
Annuity amount 417000/203.2769
Annuity amount $2,051.39
Thus, monthly payment under loan would be $2,051.39
Calculation of current payoff after 60 payments
No of payments 300 360-60
Present value of annuity Annuity amount*(1-((1.003542^-360)/0.003542)
Present value of annuity 2051.39*(1-((1.003542^-300)/0.003542)
Present value of annuity 2051.39*184.591
Present value of annuity $378,668.09
Thus, current pay off under loan is 378,668.09
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