Question

Question 9 (1 point) A couple has a $420,000 mortgage amortized over 30 years with monthly payments. They chose to lock in a rate of j2=4% for the first 5 years. Calculate their new monthly payment (rounded up to the next cent) if they refinance at j2=5.00% after the first 5 years are up. Your Answer: Answer Question 10 (1 point) Chandler borrowed $17,500 and agreed to repay the loan with payments of $500 per month. Using an interest rate of j12=3.6%, calculate the amount of principal repaid during the first year of the loan. Your Answer: Answer

Answer 1

Q9

t = 360 months

i = 4%/12 = 0.3333% per month

old monthly payment = 420000 * (A/P,0.3333%,360)

= 420000 * 0.003333 * ((1 + 0.003333)^360)/((1 + 0.003333)^360-1)

= 420000 * 0.003333 * ((1.003333)^360)/((1.003333)^360-1)

= 420000 * 0.004773922

= 2005.05

Installments left after 5 yrs = 25*12 = 300

Principal due after 5 yrs =2005.05 * (P/A,0.3333%,300)

= 2005.05 * ((1 + 0.003333)^300-1)/(0.003333 * (1 + 0.003333)^300)

= 2005.05 * ((1.003333)^300-1)/(0.003333 * (1.003333)^300)

= 2005.05 * 189.460410

= 379877.60

new internet rate = 5% / 12 = 0.4167%

New monthly payment = 379877.60 * (A/P,0.4167%,300)

= 379877.60 * 0.004167 * ((1 + 0.004167)^300)/((1 + 0.004167)^300-1)

= 379877.60 * 0.004167 * ((1.004167)^300)/((1.004167)^300-1)

= 379877.60 * 0.005846133

= 2220.81

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