# CH13 - CHAPTER 13 1 For a standard fixed-rate mortgage...

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CHAPTER 13 1. For a standard fixed-rate mortgage, compute the annual mortgage payment for a 15-year annual mortgage loan with principal of \$100 and interest rate of 10 percent. 100 = P PVA P = M n N = 15; I/YR = 10; PMT = 1; PV = PVA = ? PVA = 7.6061 13.15 = 13.147 = 7.6061 100 = M 2. In Problem 1, break each mortgage payment into interest on remaining principal and amortization for the first three years. Also, compute the remaining balance on the mortgage at each point in time. What is the total amount of interest paid over the mortgage’s life? Does this seem high or low, fair or unfair? P INT AMORT 0 100 1 96.85 10 3.15 2 93.38 9.69 3.47 3 89.57 9.34 3.81 13.15 × 15 197.25 Total Payments -100.00 Principal 97.25 Total Interest

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3. Assume that you take out a 15-year mortgage at a 10 percent interest rate and \$100 principal. Compute the amortization in year 13. Compute the percentage of the mortgage principal repaid by year 13. How many years does it take for half of the original principal to be repaid? ) y + (1 1 M = AMORT 1 + j - n j 9.88 = ) (1.10 1 13.15 = AMORT 1 + 13 - 15 13 % 18 . 77 6061 . 7 7355 . 1 6061 . 7 PVA PVA PVA = PVA PVA PVA
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