Question

Consider a 20 year fixed rate mortgage for $175,000 at nominal interest rate of 8%. If the borrower wants to pay off the remaining balance on the mortgage after making the 12th payment, what is the remaining balance on the loan? Assume monthly payments.

$157,624

$168,980

$173,538

$171,301

Answer 1

Ans $171,301

remaining balance on the loan after making the 12th payment is $171,301

P = PV = Regular Payments Loan Amount rate of interest no of periods n = r(PV) 1 -(1+r)^-n (8%/12) *175000 1-(1/(1+8%/12)^240)) 1166.666667 0.797028611 1463.77 Beginning Balance $175,000.00 $174,702.90 $174,403.81 $174,102.73 $173,799.65 $173,494.54 $173,187.40 $172,878.22 $172,566.97 $172,253.64 $171,938.23 $171,620.72 Interest $1,166.67 $1,164.69 $1,162.69 $1,160.68 $1,158.66 $1,156.63 $1,154.58 $1,152.52 $1,150.45 $1,148.36 $1,146.25 $1,144.14 Principal $297.10 $299.08 $301.08 $303.09 $305.11 $307.14 $309.19 $311.25 $313.32 $315.41 $317.52 $319.63 Ending Balance $174,702.90 $174,403.81 $174,102.73 $173,799.65 $173,494.54 $173,187.40 $172,878.22 $172,566.97 $172,253.64 $171,938.23 $171,620.72 $171,301.08 12