Question

i need part B and the rest on excel Question 1 Prepare the amortization schedule for a thirty-year loan of $100,000. The APR is 3% and the loan calls for equal monthly payments. The following table shows how you should prepare the amortization schedule for the loan. a. Interest Principal Ending Month lPayment Payment Payment Balance Beginning ota S100,000.00 b. Use the annuity formula to find how much principal you still owe to the bank at the end of the third year. Check that this value is the same you have in your amortization schedule. Suppose that in the beginning of the first month of the fourth year the interest rate decreased to 2%. Modify the amortization schedule in order to consider this change in the interest rate (you should change the values in your schedule that occur after the first month of the fourth year, not the ones before this date) c. d. Use the annuity formula to find how much principal you still owe to the bank at the encd of the fifth year schedule. Check that this value is the same you have in your amortization Suppose that in beginning of the first month of the fourth year (month 37) you are able to refinance your mortgage at the rate of 3%. Assume that there is no change in the time scheduled to pay the mortgage. If the cost of refinancing is S1,100, should your refinance your mortgage at the new rate of 2%, or keep the initial rate of 3%? e. f. You are planning to sell you current house and buy a bigger one sometime in the future, at which point you will pay off your mortgage. For how long will you stay in your current house to be worth the refinancing described in the previous question? Suppose that at the end of the seventh year you earned an unexpected amount of money (for example from your end of year bonus at work) and decided to pay a non-scheduled payment of $5,000 of the principal of the loan. You will keep paying the same monthly total payment that you were paying in the previous months. How can you change your amortization schedule, considering that you will keep paying the same total monthly amount? Prepare a new amortization schedule that accounts for these changes g.

Answer 1

	Pv	Loan amount	$100,000
	Rate	Interest rate per month=(3/12)%	0.25%
	Nper	Number of monthly payments	360	(30*12)
	PMT	Monthly Payment	$421.60	(Using PMT function of excelwith rate=0.25%, Nper=360, Pv=-100000)
	b	Principal Balance at the end of third year (36 month)
	Pmt	Monthly payments	$421.60
	Nper	Number of months of payment	36
	Rate	Interest rate per month=(3/12)%	0.25%
	PV	Present Value of 3 years payment	$14,497.47	(Using PV function of excelwith rate=0.25%, Nper=36, Pmt=-421.60)
		Present Value of Principal Balance	$85,502.53	(100000-14497.47)
		Principal Balance at end of 3 years	$93,544.16	(Using FV function of excelwith rate=0.25%, Nper=36, Pv=-85502.53)
		Principal Still owed	$93,544.16
	c	Interest Decreased to 2%
	PV	Loan Amount	$93,544.16
	Rate	Monthly interest rate=(2/12)%	0.16667%
	Nper	Number of months of payment	324	(360-36)
	PMT	Monthly Payments	$373.89	(Using PMT function of excelwith rate=0.166667%, Nper=324, Pv=-93544.16)
		MODIFIED SHEDULE	A	B	C=A*0.0016667	D=B-C	E=A-D
		Month	Beginning Balance	Total Payment	Interest Payment	Principal Payment	Ending Balance
		37	$93,544.16	$373.89	$155.91	$217.98	$93,326.18
		38	$93,326.18	$373.89	$155.54	$218.34	$93,107.84
		39	$93,107.84	$373.89	$155.18	$218.71	$92,889.13
		40	$92,889.13	$373.89	$154.82	$219.07	$92,670.06
		41	$92,670.06	$373.89	$154.45	$219.44	$92,450.62
		42	$92,450.62	$373.89	$154.08	$219.80	$92,230.82
		43	$92,230.82	$373.89	$153.72	$220.17	$92,010.65
		44	$92,010.65	$373.89	$153.35	$220.54	$91,790.12
		45	$91,790.12	$373.89	$152.98	$220.90	$91,569.21
		46	$91,569.21	$373.89	$152.62	$221.27	$91,347.94
		47	$91,347.94	$373.89	$152.25	$221.64	$91,126.30
		48	$91,126.30	$373.89	$151.88	$222.01	$90,904.29
		49	$90,904.29	$373.89	$151.51	$222.38	$90,681.91
		50	$90,681.91	$373.89	$151.14	$222.75	$90,459.16
		51	$90,459.16	$373.89	$150.77	$223.12	$90,236.04
		52	$90,236.04	$373.89	$150.39	$223.49	$90,012.55
		53	$90,012.55	$373.89	$150.02	$223.87	$89,788.68
		54	$89,788.68	$373.89	$149.65	$224.24	$89,564.44
		55	$89,564.44	$373.89	$149.27	$224.61	$89,339.83
		56	$89,339.83	$373.89	$148.90	$224.99	$89,114.84
		57	$89,114.84	$373.89	$148.52	$225.36	$88,889.48
		58	$88,889.48	$373.89	$148.15	$225.74	$88,663.74
		59	$88,663.74	$373.89	$147.77	$226.11	$88,437.63
		60	$88,437.63	$373.89	$147.40	$226.49	$88,211.14
	d	Principal Balance at the end of Fith year (60month)
	Pmt	Monthly payments	$373.89
	Nper	Number of months of payment	24
	Rate	Interest rate per month=(2/12)%	0.16667%
	PV	Present Value of 24 months payment	$8,789.01	(Using PV function of excelwith rate=0.166667%, Nper=24, Pmt=-373.89)
		Present Value of Principal Balance	$84,755.15	(93544.16-8789.01)
		Principal Balance at end of 5 years	$88,211.14	(Using FV function of excelwith rate=0.1667%, Nper=24, Pv=-84755.15)
		Principal Still owed	$88,211.14
	e	REFINANCE:
		Monthly payment as per original mortgage	$421.60
		Monthly payment if refinanced (2% interest)	$373.89
		Savings per month if refinanced at 2%	$47.72
		Number of months of payment	324
		Present Value of savings at 3% interest	$10,587.36	(Using PV function of excelwith rate=0.25%, Nper=324, Pmt=-47.72)
		Cost of Refinancing	$1,100
		Present Value Net savings at 3% discount	$9,487.36
		Youshould Refinance at new rate of 2%