Anatomy of a Long-term Loan - B 168 $147 886 B 228 $115 752...

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The Anatomy of a Long-term Loan Consider a 30-year, $200,150 mortgage at 6%. The value of the loan is indicated by the open circle on the top line of the Fgure below. The monthly payments: R =$1200.00. The periodic rate: i = . 005 . The “Fxed point” of this loan is R i = 240000 and is indicated by the large dot to the right on the top line of the Fgure. If you were to barrow $240,000 at 6% with $1,200 monthly payments the loan would never be paid o±. The closer the actual loan is to this Fxed point, the longer it will take to pay o±. In the following table we list the balance due at the end of each year; these values are then plotted on the top line of the Fgure. The balance due at the end of the k th payment period may be computed as follows: use your calculator as conFgured just after you calculate the loan payment, change N to k and solve for the future value FV . B 12 $197 , 692 B 72 $182 , 933 B 132 $163 , 025 B 192 $136 , 172 B 252 $99 , 952 B 312 $51 , 096 B 24 $195 , 083 B 84 $179 , 413 B 144 $158 , 278 B 204 $129 , 769 B 264 $91 , 314 B 324 $39 , 445 B 36 $192 , 312 B 96 $175 , 676 B 156 $153 , 237 B 216 $122 , 970 B 276 $82 , 144 B 336 $27 , 075 B 48 $189 , 371 B 108 $171 , 701
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Unformatted text preview: B 168 $147 , 886 B 228 $115 , 752 B 288 $72 , 407 B 348 $13 , 943 B 60 $186 , 248 B 120 $167 , 497 B 180 $142 , 204 B 240 $108 , 088 B 300 $62 , 071 B 360 $0 B B 12 ± ± B 24 ± ± B 36 ± ± B 48 ± ± B 60 ± ± B 72 ± ± B 84 ± ± B 96 ± ± B 108 ± ± B 120 ± ± B 132 ± ± B 144 ± ± B 156 ± ± B 168 ± ± B 180 ± ± B 192 ± ± B 204 ± ± B 216 ± ± B 228 ± ± B 240 ± ± B 252 ± ± B 264 ± ± B 276 ± ± B 288 ± ± B 300 ± ± B 312 ± ± B 324 ± ± B 336 ± ± B 348 ± ± B 360 ± ± ² ² ³ ³ $0 $250 $500 $750 $1,000 $1,250 $1,200 $0 $50,000 $100,000 $150,000 $200,000 $250,000 $240,000 $711 interest in the 181st payment $489 debt reduction in the 181st payment ± ± ± ± ± ± ± ± The bottom line in this Fgure represents a single payment and can be used to visualize how much of each payment goes to pay the interest and how much is used to reduce the debt. This division for the 181st payment is illustrated....
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