Need help with all please You just acquired a mortgage in the amount of $500,000
ID: 2806721 • Letter: N
Question
Need help with all please
You just acquired a mortgage in the amount of $500,000 at 0.25% per month interest. Equal payments are to be made at the end of each month for 15 years.
#1. What is the annual percentage (APR) on this loan?
#2. What is the effective annual rate (EAR) on this loan?
#3. If you paid $150 extra each month, how much can you save in interest payments compared to the original loan schedule?
*hint: first you will need to find total interest payments from the original loan schedule
#4. And how much can you save in time? That is, by paying extra $150 extra each month, how many years faster can you finish paying your mortgage?
#1. APR = 2.5%
#1. APR = 3%
#1. APR = 3.7%
#1. APR = 4.2%
#2. EAR = 4.82%
#2. EAR = 2.91%
#2. EAR = 3.04%
#2. EAR = 3.64%
#3. save interest of approx. $7210
#3. save interest of approx. $8550
#3. save interest of approx. $9870
#3. save interest of approx. $6690
#4. save time by approx. a little less than a year
#4. save time by approx. 2 years
#4. save time by approx. 5 years
#4. save time by approx. 10 years
#1. APR = 2.5%
#1. APR = 3%
#1. APR = 3.7%
#1. APR = 4.2%
#2. EAR = 4.82%
#2. EAR = 2.91%
#2. EAR = 3.04%
#2. EAR = 3.64%
#3. save interest of approx. $7210
#3. save interest of approx. $8550
#3. save interest of approx. $9870
#3. save interest of approx. $6690
#4. save time by approx. a little less than a year
#4. save time by approx. 2 years
#4. save time by approx. 5 years
#4. save time by approx. 10 years
Explanation / Answer
1. APR = 0.25*12 = 3%
2. EAR = (1+ 0.03/12)^12 -1 = 3.04%
3. . save interest of approx. $6690
Amount of loan = 500000
Monthly payment =PMT(0.25%,180,500000) = $3452.91
Total interest paid as per original agreement = 3452.91*180 - 500000 = $121523.48
If new monthly payments = 3452.91 + 150 = 3602.91
Number of payments required =NPER(0.25%,3602.91,-500000) = 170.64
Interest paid in this case = 3602.91 * 170.64 = 614800 - 500000 = $114800
Savings = 121523- 114800 = $6723
4. save time by approx. a little less than a year
(180 - 170.64 = less than 12 payments)