Question

A partially amortizing mortgage is made for $180,000 for a term of 30 years. The borrower and lender agree that a balance of $40,000 will remain and be repaid as a lump sum at that time. If the interest rate is 6.50%, what must the monthly payment be over the 30 year period?

a. $1,101.56
b. $1,137.72
c. $5,285.36
d. $11,700.00

Answer 1

Monthly payment= $1,137.8

Step-by-step explanation:

Giving the following information:

PV= 180,000

n= 30*12= 360

i= 0.065/12= 0.005417

To calculate the monthly payment, we need to use the following formula:

Monthly payment= (PV*i) / [1 - (1+i)^(-n)]

Monthly payment= (180,000*0.005417) / [1 - (1.005417^-360)]

Monthly payment= $1,137.8