Please solve in detail these below question. Please answer is computerized. [Que
ID: 2792976 • Letter: P
Question
Please solve in detail these below question. Please answer is computerized. [Question are related to Priciple of Real Estate subject]
Thanks,
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1) Mortgage amortization
Suppose we have loan amount $100,000 and the term is 20 years( Monthly payments) Interest rate is 7 % and the fixed rate mortgage. Compute the following items:
(1) For first three month calculate the following items:
time
Monthly interest rate
Monthly payments
Monthly interest expense
Monthly Amortization.
Balance at the beginning of the month
Balance at the end of month
First month
Second month
Third Month
2) Market value of a mortgage
Suppose a loan was made 5years age for $80,000 with interest 10% and 20 years term of maturity.. Payments on the loan are $772.02 per month. Suppose now the interest rate is 15% annually, what is market value of the loan for the remaining 15 years ?
time
Monthly interest rate
Monthly payments
Monthly interest expense
Monthly Amortization.
Balance at the beginning of the month
Balance at the end of month
First month
Second month
Third Month
Explanation / Answer
1) First we need to find the monthly interest rate payments for the mortgage. We will use the excel PMT function to get the monthly payments. The syntax for PMT is:
=pmt(rate, nper, pv,[fv],type)
Where rate is the rate of interest= 7/12=0.5833%
nper is the number of periods= 20 yrs=240 months
pv is the present value of the loan =$ 100,000
fv is the future value of the loan =0
type=0 or 1. 0 if payment is at end of the period, and 1 if payment is at the beginning of the period. We will take default value of 0.
=pmt(0.5833%, 240,100,000,0,0)
=$ 775.30 (monthly Payment)
So now we will fill in the table :
D*F
C-D
F-E
A
B
C
D
E
F
G
time
Monthly interest rate
Monthly payments
Monthly interest expense
Monthly Amortization.
Balance at the beginning of the month
Balance at the end of month
First month
0.5833%
775.30
583.33
191.97
100,000
99,808.03
Second month
0.5833%
775.30
582.21
193.09
99,808.03
99,614.95
Third Month
0.5833%
775.30
581.09
194.21
99,614.95
99,420.74
2) This is a present value exercise. . We will use to excel PV function. The syntax of the excel PV function is:
PV= (rate, nper, pmt,[FV],[type])
Where rate= Discount rate or the opportunity cost=15/12=1.25%
nper= number of periods=15 years=180 months
pmt= Dollar value of the coupon payments=$ 772.02
FV= Future value of the loan =0
Type=0 or 1. 0 means payments made at the end of the period while 1 means payment made at the beginning of the period. The default setting in excel is 0.
=PV (1.25%,180,772.02,0,0)
=$ 55,160.55
Conclusion : The market value of the loan when interest rate is 15 % is $ 55,160.55
D*F
C-D
F-E
A
B
C
D
E
F
G
time
Monthly interest rate
Monthly payments
Monthly interest expense
Monthly Amortization.
Balance at the beginning of the month
Balance at the end of month
First month
0.5833%
775.30
583.33
191.97
100,000
99,808.03
Second month
0.5833%
775.30
582.21
193.09
99,808.03
99,614.95
Third Month
0.5833%
775.30
581.09
194.21
99,614.95
99,420.74