Assume you’ve recently purchased a home for $129,000 and you will be making monthly payments on the mortgage. If the mortgage is for 30 years at an interest rate of 5%, what will be the monthly payment? For the first monthly payment, how much will go towards interest payment and how much will go towards repayment of the principal?
PVOrdinary Annuity = C*[(1-(1+i/100)^(-n))/(i/100)] |
C = Cash flow per period |
i = interest rate |
n = number of payments |
129000= Cash Flow*((1-(1+ 5/1200)^(-30*12))/(5/1200)) |
Cash Flow = 692.5 |
Monthly rate(M)= | yearly rate/12= | 0.42% | Monthly payment= | 692.50 | |
Month | Beginning balance (A) | Monthly payment | Interest = M*A | Principal paid | Ending balance |
1 | 129000.00 | 692.50 | 537.50 | 155.00 | 128845.00 |
Where |
Interest paid = Beginning balance * Monthly interest rate |
Principal = Monthly payment – interest paid |
Ending balance = beginning balance – principal paid |
Beginning balance = previous Month ending balance |
Assume you’ve recently purchased a home for $129,000 and you will be making monthly payments on...
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