Question

Ms. Esperanto obtained a $41,900 home equity loan at 9.3% compounded monthly. (Do not round intermediate calculations. Round the PMT and final answers to 2 decimal places.)

a. What will she pay monthly if the amortization period is 16 years? Payment $ permonth
b. How much of the payment made at the end of the sixth year will go towards principal and how much will go towards interest?
c. What will be the balance on the loan after six years? Balance $
d. How much interest did she pay during the sixth year? Interest paid $

Answer 1

Ms. Esperanto will pay approximately $396.71 per month for the 16-year amortization period.

Step-by-step explanation:

To calculate the monthly payment for the home equity loan, we can use the formula for the monthly payment of an amortizing loan:

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

where PMT is the monthly payment, P is the principal amount of the loan, r is the monthly interest rate, and n is the total number of payments.

In this case, P = $41,900, r = 9.3% / 12 = 0.775%, and n = 16 * 12 = 192.

Plugging these values into the formula, we get:

PMT = $41,900 * 0.00775 * (1 + 0.00775)^192 / ((1 + 0.00775)^192 - 1) = $396.71

So, Ms. Esperanto will pay approximately $396.71 per month for the 16-year amortization period.