Question

​(Loan amortization​) Mr. Bill S.​ Preston, Esq., purchased a new house for ​$170,000. He paid ​$25,000 down and agreed to pay the rest over the next 30 years in 30 equal​ end-of-year payments plus 11 percent compound interest on the unpaid balance. What will these equal payments​ be

Answer 1

Answer:

The equal payments amount is $16,678.57

Explanation:

Hi, first we need to determine what the loan amount is, we can do that by substracting $25,000 (down payment) from the cost of the new house, that would be $170,000 - $25,000 = $145,000.

Now, we need to solve for "A" the following equation, given a rate of 11% compounded annually, number of yearly payments equals 30 and a present value of $145,000

$PresentValue=\frac{A((1+r)^{n}-1) }{r(1+r)^{n} }$

Everything should look like this.

$145,000=\frac{A((1+0.11)^{30}-1) }{0.11(1+0.11)^{30} }$

$145,000=A(8.693792573)$

Therefore, A = $16,678.57

Best of luck.