finance 199 term project

finance 199 term project - Interest Principle Balance 1 (2)...

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12/3/07 Finance 199 Term Project Doug Metzger Year Payment Interest Principle Balance 1 $11,347.67 $9,500.00 $1,847.67 $98,152.33 2 $11,347.67 $9,324.47 $2,023.20 $96,129.13 3 $11,347.67 $9,132.27 $2,215.40 $93,913.73 4 $11,347.67 $8,921.80 $2,425.87 $91,487.86 5 $11,347.67 $8,691.35 $2,656.32 $88,831.54 6 $11,347.67 $8,439.00 $2,908.67 $85,922.87 7 $11,347.67 $8,162.67 $3,185.00 $82,737.87 8 $11,347.67 $7,860.10 $3,487.57 $79,250.30 9 $11,347.67 $7,528.78 $3,813.89 $75,431.41 10 $11,347.67 $7,165.98 $4,181.69 $71,249.72 Original Loan Using the formula, = -[ + $due 1 1 it - + 11 in - 1 Loan , the total due on the original loan at time of payoff is $71,249.72. Let’s check that using an amortization schedule: Refinanced Loan Again, using the formula, = -[ + $due 1 1 it - + 11 in - 1 Loan , the total due on the refinanced loan at time of payoff is $69,489.81. Let’s check this value using an amortization schedule again: Year Payment
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Unformatted text preview: Interest Principle Balance 1 (2) $10,590.77 $8,342.95 $2,247,82 $95,904.51 2 (3) $10,590.77 $8,151,88 $2,438.87 $93,465.62 3 (4) $10,590.77 $7,944.58 $2,646.19 $90,819.43 4 (5) $10,590.77 $7,719.65 $2,871.12 $87,948.31 5 (6) $10,590.77 $7,475.61 $3,115.16 $84,833.15 Finance 199 Term Project Doug Metzger 6 (7) $10,590.77 $7,210.82 $3,379.95 $81,453.20 7 (8) $10,590.77 $6,923.52 $3,667.25 $77,785.95 8 (9) $10,590.77 $6,611.81 $3,978.96 $73,806.99 9 (10) $10,590.77 $6,273.59 $4,317.18 $69,489.81 The difference between these payments is $1,759.91. Using the equation for Present Value, the internal rate of return on the cost to refinance ($2,944.57) can be determined. , . ( + ) = , . $2 944 57 1 i 9 $1 759 91 Solving for i , the internal rate of return, the answer is 5.89%....
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finance 199 term project - Interest Principle Balance 1 (2)...

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