Question

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A borrower takes-out a fully amortizing loan for $1,000,000. The term of the loan is 30 years. The initial interest is 6% APR, compounded monthly. After one year, the interest rises to 8% APR, compounded monthly. After two years, the interest falls back to 6% APR, compounded monthly. After three years, the interest further falls to 4% APR, and it remains at 4% APR for the rest of the loan term Part A What are the monthly mortgage payments during the second year? Part B What is the balance of the loan at the end of the second years?

Answer 1

(a)	Loan($)	10,00,000
	Term	30
	Rate (monthly)	0.67%
	EMI($) (monthly)	7338
	Interest on EMI($) (monthly)	6667
	PPMT(monthly)	671

(b)	1st year
	Loan($)	10,00,000
	Term	30
	Rate	6%
	EMI($) (yearly)	71946
	Interest on EMI($) (yearly)	60000
	PPMT(yearly)	11946

2nd Year
Loan($)	988054
Term	30
Rate (Yearly)	8%
EMI($) (yearly)	87000
Interest on EMI($) (yearly)	79044
PPMT(yearly)	7956

Amount	Principal	Loan amount - principal	Interest
1000000	11946	988054	60000
988054	7956	980098	79044