Question

Grace bought a property valued at $200,00.00 and 20% down and a mortgage amortized over 10 years. She makes equal payments due at the end of every months. Interest on the mortgage is 4% compounded semi-annually and the mortgage is renewable after five years. a) What is the size of each monthly payment? b) What is the outstanding principal at the end of the five-year term? c) What is the cost of the mortgage for the first five years?

Answer 1

Size of each monthly payment = $161.69 per month

Explanation:

Given:

Value of property = $20,000

Downpayment = 20%

Number of payment = 12 x 10 = 120

Interest rate = 4% = 4% / 12 = 0.33 %

Computation:

Loan balance = 20,000 - 20%

Loan balance = $16,000

A] Size of each monthly payment [In Excel]

Size of each monthly payment = PMT(0.33%,120,16000,0)

Size of each monthly payment = $161.69 per month