Question

A partially amortizing mortgage is made for $180,000 for a term of 30 years. The borrower and lender agree that a balance of $40,000 will remain and be repaid as a lump sum at that time. If the interest rate is 6.50%, what must the monthly payment be over the 30 year period

Answer 1

Step-by-step explanation:

rate of interest = 6.5

rate of interest compounded monthly = ( 1 + .065/ 12 )¹² - 1

= 6.676

Present value of 40000 which is to be adjusted after 30 years

= 5394

present value of loan

180000 - 5394 = 174606

Now amount mortgaged = 174606

Rate of interest = 6.676 %

No of payment = 29 x 12 + 11 = 359

Monthly instalment from chart

= 1126 .