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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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