Question

You get a 20-year mortgage loan of $270,000 at 4.75% interest. You make your first payment on April 1. Use your financial calculator to calculate the calendar-year interest for Year 2.​

Answer 1

To calculate the calendar-year interest for Year 2 of a 20-year mortgage loan, we can use the loan amortization formula to determine the remaining principal balance after the first year and then multiply it by the annual interest rate.

Step-by-step explanation:

To calculate the calendar-year interest for Year 2 of a 20-year mortgage loan, we first need to determine the remaining principal balance after the first year. We can use the loan amortization formula to calculate the monthly payment:

P = A * (1 - (1 + r/n)^(-n*t))/(r/n)

Where:
P = Principal balance
A = Monthly payment
r = Annual interest rate
n = Number of compounding periods per year
t = Number of years

Using the given information:

P = $270,000 * (1 - (1 + 0.0475/12)^(-12*20))/(0.0475/12)

After obtaining the principal balance, we can calculate the interest for Year 2 by multiplying the remaining balance by the annual interest rate:

Interest = P * r

Plugging in the values:

Interest = $P * 0.0475