Homework Answers
| Using the present value of annuity formula we can calculate the original amount borrowed | |||||
| Present value of annuity | Monthly payment*((1-(1+r)^-n))/r | ||||
| where r is interest rate and n is number of payments | |||||
| Monthly rate (r ) | 0.44% | 5.3%12 | |||
| No of payments (n) | 72 | 6*12 | |||
| Calculation of original loan amount borrowed is shown below | |||||
| Present value of annuity | 46784.16*((1-(1.0044^-72))/0.0044 | ||||
| Present value of annuity | 46784.16*61.55945 | ||||
| Present value of annuity | $2,880,007.19 | ||||
| Thus, original loan amount borrowed is $2,880,007.19 | |||||
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