Question

Problem 4-29
Loan Amortization

Assume that your aunt sold her house on December 31, and to help close the sale she took a second mortgage in the amount of $50,000 as part of the payment. The mortgage has a quoted (or nominal) interest rate of 7%, but it calls for payments every 6 months, beginning on June 30, and is to be amortized over 5 years. Now, 1 year later, your aunt must inform the IRS and the person who bought the house about the interest that was included in the two payments made during the year. (This interest will be income to your aunt and a deduction to the buyer of the house.) To the closest dollar, what is the total amount of interest that was paid during the first year?

$  

Answer 1

Interest in the first year =

$3,350.83

Semiannual payment	$6,012.07
Table
Payment	opening balance	Interest	Principal	Closing balance
1	$50,000.00	$1,750.00	$4,262.07	$45,737.93
2	$45,737.93	$1,600.83	$4,411.24	$41,326.69
	Total	$3,350.83

WORKINGS

AutoSave of o . Book1 - Excel File Home Insert Draw Page Layout Formulas Data Review View Help Calibri -11 A A = = = y 1 General BIU - IA SI 3 $ -% Clipboard Font Alignment Number - X V fx Table A B D E F Tell me what you want to do 2 PZ Conditional Format as Cell Formatting Table Styles Sign in - 0 X Share Comments Insert E 47 0 Delete - 5. ZY U Format Sort & Find & Filter Select Cells Editing 6- Paste Styles G H Semiannual payment =PMT(7%/2,5*2,-50000) Table Payment opening balance 50000 =F7 Interest Principal Closing balance =C787%/2 =$C$3-D7 =C7-E7 =C8*7%/2 =$C$3-D8 =C8-E8 Total =D8+D7