Final answer:
The monthly payment for a 30-year real estate loan with an APR of 8.5% and a principal of $200,000 is calculated using an amortization formula. The interest paid over the life of the loan is found by subtracting the principal from the total payments made. To find the outstanding principal balance after 20 payments, an amortization schedule or financial calculator can be used.
Step-by-step explanation:
To determine the monthly payment for a 30-year real estate loan with an APR of 8.5% and an initial principal of $200,000, we use the formula for the monthly payment on an amortized loan:
PMT = P * (r(1+r)^n) / ((1+r)^n - 1)
Where:
- PMT is the monthly payment
- P is the principal amount ($200,000)
- r is the monthly interest rate (APR / 12 months = 8.5% / 12)
- n is the total number of payments (30 years * 12 months = 360 payments)
We then calculate the total interest paid over the life of the loan by subtracting the initial principal from the total amount paid (PMT * n).
To find the outstanding principal balance after 20 payments, we need to create an amortization schedule or use an appropriate financial calculator. The balance would decrease with each monthly payment, as part of each payment is applied to the principal and part to the interest.