Question

A borrower took out a 30-year fixed-rate mortgage of $2,250,000 at a 7.2 percent annual rate. After 10 years, he wishes to pay off the remaining balance. Interest rates have by then fallen to 7 percent. How much must he pay to retire the mortgage (to the nearest dollar)? Group of answer choices $2,015,678 $2,122,426 $1,939,766 $2,225,330 $2,212,041

Answer 1

$2,122,426

Step-by-step explanation:

The computation of the amount that must to pay for the retirement of the mortgage is given below:

But first we have to determine the monthly payment i.e. PMT by using excel function

PV=-$2,250,000

RATE = 7.2% ÷ 12 = 0.6%

N = 12 × 30 = 360

FV = 0

PMT = $15,272.73

Now we have to determine the future value

Given that

PV=-$2,250,000

RATE = 7.2% ÷ 12 = 0.6%

N = 12 × 5 = 60

PMT = $15,272.73

So, FV = $2,122,425.62