Question

Help ure.vretta.com Vretta BMAT text Question 2 of 4 James purchased a house for $475,000. He made a down payment of 10.00% of the value of the house and received a mortgage for the rest of the amount at 4.329 compounded semi-annually amortized over 15 years. The interest rate was fixed for a 7 year period. 59 a. Calculate the monthly payment amount. rint $0.00 Round to the nearest cent b. Calculate the principal balance at the end of the 7 year term. $0.00 Round to the nearest cent c. Calculate the monthly payment amount if the mortgage was renewed for another 7 years at 4.12% compounded semi-annually? Round to the nearest cent Next Question PC W

Answer 1

The actual loan amount is $475,000 x 90% = $427,500. The semi-annual interest is (4.32% + 2) = 2.16%. Interest per month is calculated below: (12) 6 (2 12 1+2 - = 1 + -1 = (1+0.0216) 3 -1 = 0.003568 Monthly payment can be calculated with the help of below expression: 1-(1+i) Present value of loan = Monthly payment | $427,500 = Monthly payment 1-(1+0.003568)-180 0.003568 $427,500 0.003568 - -150 = Monthly payment 1-(1.003568) $3,222.83 = Monthly payment

Principal balance at the end of 7 year is calculated below: ((1+i) 127-1 Principal value = Loan amountx(1 + i)*? - Monthly payment 34 w = $427,500X (1+0.003568) ** - $3,22 ) -33,222.83 x (1+0.003568) - 1 0.003568 = $576,590.82-$315.012.33 = $261,578.49 The revised loan amount is $261,578.49.

The revised semi-annual interest is (4.12% + 2) = 2.06%. Interest per month is calculated below: 12) , 2 5 12 =1+31-1 = (1+0.0206) - 1 Revised monthly payment is calculated below: = 0.003404 1-(1+i)* Revised value of loan = Revised monthly payment $261,578.49 = Revised monthly payment x 1-(1+0.003404) 0.003404 0.003404 $261,578.49 = Revised monthly payment (1-(1.003404) 955 $3,198.78 = Revised monthly payment