A manufacturer needs to borrow money to purchase a building. The purchase price of the building...
A manufacturer needs to borrow money to purchase a building. The purchase price of the building is $1.5 million, and the company will put $300,000 in cash down at closing. If the company can borrow the difference from its bank at 4.85% for 20 years, what will the monthly principal and interest payment of the loan be? Create an amortization schedule also.
Homework Answers
If the down payment = 300000 then the loan amount = 1500000-300000 = 1.2 million
We are given the following information:
| r | 4.85% |
| n | 20 |
| frequency | 12 |
| PV | $ 12,00,000.00 |
We need to solve the following equation to arrive at the required monthly payment:
So the total monthly payment is 7820.37 including principal and interest
Amortization schedule is as follows:
Opening balance = previous year's closing balance
Closing balance = Opening balance-Principal repayment
PMT is calculated as per the above formula
Interest = 0.0485 /12 x opening balance
Principal repayment = PMT - Interest
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