{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Problem Set 5

Problem Set 5 - Xi 1 ECON 252 Problem Set#5 Sunny Xi TA...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Xi ECON 252 1 Problem Set #5 Sunny Xi TA: Christian 1. What is the monthly payment on a forty-year $100,000 home mortgage with a fixed rate of 5%? = / × - ( + ) mortpaymonthly mortbal1r 12 1 1 1 r12 12t With balance = $100,000, = . r 05 and = t 40 , the equation become. = . / × - ( +. ) ( ) mortpaymonthly 1000001 05 12 1 1 1 0512 12 40 Monthly payment = . $482 20 2. What fraction of the first monthly payment (one month after closing on the home) is amortization of principal? What fraction is interest? First, the interest payment for the first month is simply the monthly interest of the full $100,000. ×. = . $100000 0512 $416 67 Hence, . . = . % $416 67$482 2 86 4 of the first monthly payment is set for interest. The amortization of capital is simply the remaining portion of the payment, . - $482 20 . = . $416 67 $65 53 . In the first month, only 15.6% of the payment is directed towards the amortization of the capital. 3. What is the mortgage balance after one month? ( , + . )- . = , . $100 000 $416 67 $482 20 $99 934 47 or , - . = , . $100 000 $65 53 $99 934 47 4. What fraction of the last monthly payment (exactly forty years after closing) is amortization of principal? What fraction is interest?
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern