The principal amount of the loan borrowed is $12,000, origination fee of $50, interest rate is...
The principal amount of the loan borrowed is $12,000, origination fee of $50, interest rate is 6.20%. With no payments due before, what will the payoff be in 6 months?
Homework Answers
| Calculation of Loan payoff in 6 months | |||||||||
| We can calculate the loan payoff using future value of sum formula stated under, | |||||||||
| FV = P * (1+r)^n | |||||||||
| FV = Loan payoff = ? | |||||||||
| P = principal amount of loan borrowed = $12000 | |||||||||
| r = interest rate per month = 6.20%/12 = 0.005167 | |||||||||
| n = number of months = 6 | |||||||||
| FV = 12000 * (1+0.005167)^6 | |||||||||
| FV = 12000 * 1.03140 | |||||||||
| FV = 12376.84 | |||||||||
| Loan payoff in 6 months = $12,376.84 | |||||||||
| Note | |||||||||
| An origination fee is an upfront fee charged by a lender for processing a new loan application. | |||||||||
| Hence it is not considered in calculation of payoff. | |||||||||
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