58.4k views
2 votes
The monthly mortgage payment on your house is $821.69. it is a 30 year mortgage at 6.5% compounded monthly. how much did you borrow?

User Shaun Keon
by
6.3k points

1 Answer

0 votes
To find present value from monthly payments, we use
P_A=A((1+i)^n-1)/(i(1+i)^n)
where
A=monthly payment = $821.69
i=monthly interest rate = 6.5%/12 = 0.065/12
n=number of months = 30*12 = 360
Therefore
Present value
= amount borrowed
=A((1+i)^n-1)/(i(1+i)^n)
=821.69*((1+0.065/12)^360-1)/((0.065/12)*(1+0.065/12)^360)
= 130000.25
(note: the 0.25 could well be a round off error because the monthly payment is only accurate to the cent)

User Aimn Blbol
by
6.9k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.