Question

Sophie received a 25 year loan of $245,000 to purchase a house. The interest rate on the loan was 2.00% compounded semi-annually. a. What is the size of the monthly loan payment? Round to the nearest cent b. What is the balance of the loan at the end of year 3? Round to the nearest cent c. By how much will the amortization period shorten if Sophie makes an extra payment of $30,000 at the end of year 3? years months

Answer 1

SOLUTION P= $245000 ) += 25 years i -2%. r= 2 Too 12 FORMULA Y- Oo2 12 n = 25 X 12 rliton A = P. (1+r)" n- 300 300 A= 245.000 (0.00166667) (1+0.00166667) (1 + 0.00166607)-1 300 PAYMENT AMOUNT A $1038.44 MONTHLY PAYMENT - $ 1038.44 6 LOAN PAID IN 3 years 1038.44 X 3 X 12 $37383.84 IN 25 years TOTAL = 1038.44 X 300 $ 311532 BALANCE OF LUAN AT THE END OF 3 years END OF 311532 – 37383.84 BALANCE = $274148.16 3 years b)