Question

A young executive is going to purchase a vacation property for investment purposes. She needs to borrow $128,000.00 for 25 years at a 5.3% annual interest rate, with interest compounded monthly, and will make monthly payments of $770.82. (Round all answers to 2 decimal places.)

Create an amortization table to answer the following:

a) What is the unpaid balance after 9 months? $


b) Over the 9 months in part (a), how much total interest did she pay?

Answer 1

(a) After 9 months, the unpaid balance is $125,874.09.

(b) Over the 9 months, she paid a total of $4,918.56 in interest.

To create the amortization table, we can use the formula for calculating the monthly payment of a loan:

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

where:

P = monthly payment

r = monthly interest rate

A = loan amount

n = total number of payments

In this case, we have:

A = $128,000.00

n = 25 years * 12 months/year = 300 months

r = 5.3% / 12 = 0.00441666667

Using the formula, we can calculate the monthly payment:

P = (0.00441666667 * $128,000.00) / (1 - (1 + 0.00441666667)^(-300))

P = $770.82

Now, we can create the amortization table: