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RE410_Assignment_1_Solutions

# RE410_Assignment_1_Solutions - RE 410 Spring 2007-2008...

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RE 410, Spring 2007-2008 (Keyi Xu) Assignment 1 – Solutions: 1. Consider a constant payment mortgage of \$100,000, maturity 30 years, interest rate 6%, monthly payments. (a) What is the monthly payment? Enter: N=360 [maturity months: 30*12], I=6 [annual rate], PV=\$100,000 [Loan amount], implied FV=0 [don’t need to enter this]. Press: PMT [you should get: \$599.55] (b) What is the principal payment and interest payment in the second month? Enter: 1, Input, 1, shift Amt Switch between Amt, Int, and OLB by pressing “=” [this tells principle and interest paid in 1 st month, as well as OLB at the end of 1 st month Repeat the above two steps for 2 nd month [Enter: 1, Input, 2, shift Amt, “=”] Amt paid during 2 nd month: \$199.60-\$99.55 = \$100.05 Interest paid during 2 nd month: \$999.50-\$500.00 = \$499.50 Month Principle paid in this month Principle paid so far Interest paid in this month Interest paid so far OLB by the end of this month 1st \$99.55 \$99.55 \$500.00 \$500.00 \$99,900.45 2nd \$100.05 \$199.60 \$499.50 \$999.50 \$99,800.40 (c) What is the outstanding balance after 5 years?
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