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a. Construct an amortization schedule for the $300,000 loan with a 2.2% interest rate compounded monthly. The loan will be paid back in 15 years making monthly payments. You need to calculate the principal payment and interest payment respectively of each month.

b. Construct an amortization schedule for the $300,000 loan with a 2.7% interest rate compounded monthly. The loan will be paid back in 30 years making monthly payments.You need to calculate the principal payment and interest payment respectively of each month.

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jepessoa

Answer:

since there is not enough room here, I prepared two amortization schedules on an excel spreadsheet and I attached them

Explanation:

in order to determine the monthly payment, we can use the formula to calculate present value of an annuity:

PV = annuity payment x annuity factor

annuity payment = PV / annuity factor

  • PV = $300,000
  • annuity factor for 2.2% / 12 = 0.18333% and 180 periods = 153.1964438

I used an annuity calculator to determine the annuity factor

annuity payment = $300,000 / 153.1964438 = $1,958.27

we use the same formulas for the second question:

PV = annuity payment x annuity factor

annuity payment = PV / annuity factor

  • PV = $300,000
  • annuity factor for 2.7% / 12 = 0.225% and 360 periods = 246.54977

I used an annuity calculator to determine the annuity factor

annuity payment = $300,000 / 246.54977 = $1,216.79

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