QUESTION 18 From: PrincialasaLEin ancamith Enai andad. Benninga and Mofkad, 2018
ID: 2808220 • Letter: Q
Question
QUESTION 18 From: PrincialasaLEin ancamith Enai andad. Benninga and Mofkad, 2018, 201 1 ' 2006 You just bought the first floor of the tamous "Egg-Plant Builcing for S250,000. You plan to rent the space bo conveniance stores. Your banker has oered you a motgage with the following terms: PART A Marlgage Principal Sove for the Monnly PaymenS: Tenm in Months: APR: Initiation Fee: Points: Points as a %: 250,D00.00 Use PMT function 8.00% 1,500.00 What is the EAIR of the Mortgage? Mornthly Rate Using Rate Funtction: EAIR Complete the Amortization Table USE THE IPMT and PPMT Functions BEG. PRINC PART B Check your EAIR by Filling in the C.F.Table and Calculating the IAAEAIR EAIA 10 12 13 15 16 17 18 21 23Explanation / Answer
Solution A Mortgage Principal $ 250,000 Term in Months $ 36 APR (Rate of Interest) 8.00% Initiation Fees $ 1,500 Points $ 1 Payments Per Month (PMT) $7,787.09 =PMT(C5/12,C4,-C3+C6) Intitiation fees have been adjusted from mortgage principal Solution C PMT NO Opening Balance IMPT PMT Ending Principal Balance $ (251,500) 1 $ 248,500 $ 1,657 $ 7,787 $ 242,370 2 $ 242,370 $ 1,616 $ 7,787 $ 236,198 3 $ 236,198 $ 1,575 $ 7,787 $ 229,986 4 $ 229,986 $ 1,533 $ 7,787 $ 223,732 5 $ 223,732 $ 1,492 $ 7,787 $ 217,436 6 $ 217,436 $ 1,450 $ 7,787 $ 211,099 7 $ 211,099 $ 1,407 $ 7,787 $ 204,719 8 $ 204,719 $ 1,365 $ 7,787 $ 198,297 9 $ 198,297 $ 1,322 $ 7,787 $ 191,832 10 $ 191,832 $ 1,279 $ 7,787 $ 185,324 11 $ 185,324 $ 1,235 $ 7,787 $ 178,772 12 $ 178,772 $ 1,192 $ 7,787 $ 172,177 13 $ 172,177 $ 1,148 $ 7,787 $ 165,537 14 $ 165,537 $ 1,104 $ 7,787 $ 158,854 15 $ 158,854 $ 1,059 $ 7,787 $ 152,126 16 $ 152,126 $ 1,014 $ 7,787 $ 145,353 17 $ 145,353 $ 969 $ 7,787 $ 138,535 18 $ 138,535 $ 924 $ 7,787 $ 131,671 19 $ 131,671 $ 878 $ 7,787 $ 124,762 20 $ 124,762 $ 832 $ 7,787 $ 117,807 21 $ 117,807 $ 785 $ 7,787 $ 110,805 22 $ 110,805 $ 739 $ 7,787 $ 103,757 23 $ 103,757 $ 692 $ 7,787 $ 96,661 24 $ 96,661 $ 644 $ 7,787 $ 89,519 25 $ 89,519 $ 597 $ 7,787 $ 82,328 26 $ 82,328 $ 549 $ 7,787 $ 75,090 27 $ 75,090 $ 501 $ 7,787 $ 67,804 28 $ 67,804 $ 452 $ 7,787 $ 60,469 29 $ 60,469 $ 403 $ 7,787 $ 53,085 30 $ 53,085 $ 354 $ 7,787 $ 45,651 31 $ 45,651 $ 304 $ 7,787 $ 38,169 32 $ 38,169 $ 254 $ 7,787 $ 30,636 33 $ 30,636 $ 204 $ 7,787 $ 23,053 34 $ 23,053 $ 154 $ 7,787 $ 15,420 35 $ 15,420 $ 103 $ 7,787 $ 7,736 36 $ 7,736 $ 52 $ 7,787 $ (0) Solution B IRR/EAIR 21.560% =IRR(D16:D52)*12*3