Homework Answers
Annual payment (PMT) on mortgage loan can be calculated with the help of PV of an Annuity formula
PV = PMT * [1-(1+i) ^-n)]/i
Where,
Present value (PV) =$150,000
PMT = Annual payment =?
n = N = number of payments = 20 years
i = I/Y = interest rate per year = 12%
Therefore,
$150,000 = PMT* [1- (1+12%) ^-20]/12%
= $20,081.82
The amount of your annual payment will be $20,081.82
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