Victor Connors work at Home Trust Mortgage (HTM) company. One of his duties at work is...

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Finance

Victor Connors work at Home Trust Mortgage (HTM) company. One ofhis duties at work is to prepare informative tables, charts andgraphs showing monthly payments to clients for various loanamounts. You are Victor’s assistant. You should help him with thefollowing: Consider a $300,000 loan to be repaid in equal end ofmonth installments for the next 30 years at an interest rate of4.25 percent (compounded monthly). Now answer the following basedon the loan above:
1. Calculate monthly payments to pay off the mortgage.
2. Set up an amortization schedule. What is the remainingbalance after 6 years (72 payments)?
3. Create a graph showing how the monthly payments are sharedbetween interest and principal. How much is paid towards interestpayments over these 30 years. 4. What would be your overall savingsif the interest rate were to decline to
4.125 percent instead of 4.25 percent original rate if you madean initial payment of $2,000? Is it worth making this payment.
Make sure to answer questions 1, 2, and 3 in Sheet 1 andquestion 4 in Sheet 2.

Answer & Explanation Solved by verified expert

4.2 Ratings (798 Votes)

Total Amount of loan 300000 Term 30 Years Rate of interest 425 Since payment is compounded monthly no of terms 30 12 360 Monthly payments Rate of interest Monthly 42512 03542 Monthly Monthly payment Amount of loan Present value annuity factor Present value annuity factor 1 1 r1 1 1 r2 1 1 r31 1 r 360 Question 1 Monthly payment 300000 203277 147582 Question 2 Amortization Schedule Month Principal Interest Total Paid Balance 1 41332 106250 147582 29958668 2 41478 106104 147582 29917190 3 41625 105957 147582 29875565 4 41773 105809 147582 29833792 5 41921 105661 147582 29791871 6 42069 105513 147582 29749802 7 42218 105364 147582 See Answer

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Transcribed Image Text

Victor Connors work at Home Trust Mortgage (HTM) company. One ofhis duties at work is to prepare informative tables, charts andgraphs showing monthly payments to clients for various loanamounts. You are Victor’s assistant. You should help him with thefollowing: Consider a $300,000 loan to be repaid in equal end ofmonth installments for the next 30 years at an interest rate of4.25 percent (compounded monthly). Now answer the following basedon the loan above:1. Calculate monthly payments to pay off the mortgage.2. Set up an amortization schedule. What is the remainingbalance after 6 years (72 payments)?3. Create a graph showing how the monthly payments are sharedbetween interest and principal. How much is paid towards interestpayments over these 30 years. 4. What would be your overall savingsif the interest rate were to decline to4.125 percent instead of 4.25 percent original rate if you madean initial payment of $2,000? Is it worth making this payment.Make sure to answer questions 1, 2, and 3 in Sheet 1 andquestion 4 in Sheet 2.