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Horace and Myrtle want to buy a house. Their banker offered them a fully amortizing $95,000...

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Finance

Horace and Myrtle want to buy a house. Their banker offered thema fully amortizing $95,000 loan at a 12% annual rate for 30 years.What will their monthly payment be if they make equal monthlyinstallments over the next 30 years. (show calculation) Now, whatis their loan balance at the end of year 4?

Answer & Explanation Solved by verified expert
3.9 Ratings (656 Votes)

Information provided:

Present value= $95,000

Time= 30 years*12= 360 months

Interest rate= 12%/12= 1%

1.The monthly payment is computed by entering the below in a financial calculator:

PV= -95,000

I/Y= 1

N= 360

Press the CPT key and PMT to compute the monthly payment.

The value obtained is 977.18.

Therefore, the monthly payment is $977.18.

2.4 years*12= 48 months

Loan balance at the end of year 4= $95,000 - $977.18*48

                                                      = $95,000 - $46,904.73

                                                       = $48,095.27.

In case of any query, kindly comment on the solution.
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Horace and Myrtle want to buy a house. Their banker offered thema fully amortizing $95,000 loan at a 12% annual rate for 30 years.What will their monthly payment be if they make equal monthlyinstallments over the next 30 years. (show calculation) Now, whatis their loan balance at the end of year 4?

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