The given mortgage is $100,000, so PV = The 4.3% annual interest rate as a decimal is 0.043, so the monthly interest rate is i = 0.043 If the investment is for 25 years with monthly payments, then the number of pay periods is n = 25 - 12 =
The given mortgage is $100,000, so PV = The 4.3% annual interest rate as a decimal is 0.043, so the monthly interest rate is i = 0.043 If the investment is for 25 years with monthly payments, then the number of pay periods is n = 25 - 12 =
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 15P
Related questions
Question
![This question has several parts that must be completed sequentially. If you skip a part of the question, you will not receive any points for the skipped part, and you will not be able to come back to the
skipped part.
Tutorial Exercise
Determine the outstanding principal of the given mortgage. (Assume monthly interest payments and compounding periods.) HINT [See Example 7.]
a $100,000, 25-year, 4.3% mortgage after 10 years
Step 1
Note that this question asks us to find the outstanding principal, after the first 10 years, on a 25-year, $100,000 mortgage.
The present value formula can be used to calculate the outstanding principal on a mortgage, but to use this formula, the monthly payment on the mortgage must be known.
To calculate the monthly payment PMT on a mortgage valued at PV dollars for n periods at an interest rate of i per period, use the formula PMT
= PV
The given mortgage is $100,000, so PV =
The 4.3% annual interest rate as a decimal is 0.043, so the monthly interest rate is i =
0.043
If the investment is for 25 years with monthly payments, then the number of pay periods is n = 25 · 12 =
1
i
-n
(1 + i)¯n¸](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9f9ed4e4-5291-4cbf-904a-7d0184ddd5fc%2F52f1ab77-2ab0-4390-aa11-fd8e5c6f39d4%2Fap4lnp_processed.png&w=3840&q=75)
Transcribed Image Text:This question has several parts that must be completed sequentially. If you skip a part of the question, you will not receive any points for the skipped part, and you will not be able to come back to the
skipped part.
Tutorial Exercise
Determine the outstanding principal of the given mortgage. (Assume monthly interest payments and compounding periods.) HINT [See Example 7.]
a $100,000, 25-year, 4.3% mortgage after 10 years
Step 1
Note that this question asks us to find the outstanding principal, after the first 10 years, on a 25-year, $100,000 mortgage.
The present value formula can be used to calculate the outstanding principal on a mortgage, but to use this formula, the monthly payment on the mortgage must be known.
To calculate the monthly payment PMT on a mortgage valued at PV dollars for n periods at an interest rate of i per period, use the formula PMT
= PV
The given mortgage is $100,000, so PV =
The 4.3% annual interest rate as a decimal is 0.043, so the monthly interest rate is i =
0.043
If the investment is for 25 years with monthly payments, then the number of pay periods is n = 25 · 12 =
1
i
-n
(1 + i)¯n¸
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