How to solve this amortization question
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How to solve this amortization question

[From: ] [author: ] [Date: 12-06-01] [Hit: ]
d) What is the equity after 20 years?>>Please explain your answer. Thank you!!-loan to be financed = 180,000-14,......
A couple has decided to purchase a $180000 house using a down payment of $14000. They can amortize the balance at 9% over 25 years.
a) What is their monthly payment?
b) What is the total interest paid?
c) What is the equity after 5 years?
d) What is the equity after 20 years?

>>Please explain your answer. Thank you!!

-
loan to be financed = 180,000-14,000 = 166,000

a)
PMT = PVr/(1-(1+r)^-n) with r & n adjusted for periodicity
= 166000*.0075/(1-1.0075^-300) = 1393.07 <------

b)
1393.07*300 - 166000 = 251,921 <-------

c)
assuming value of house appreciates at interest rate
PV(1+r)^n - PMT((1+r)^n-1)/r
166000*1.0075^60 - 1393.04(1.0075^60-1)/.0075 = 154,834.21 <-----

d)
do at least one yourself !

-
that is because i inadvertently gave the outstanding balance
with the stated assumption, and full value given,
166000*1.0075^60 - 154,834.21 =105,068.84

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