Answer:The Current Portion of debt in month 16 is $1461958.53 (rounded off to two decimals)
Explanation:
The question requires us to calculate the balance of the loan in 16 months time. The Balance of the Loan is calculated by taking the loan amount and calculates the Future Value of the amount (in 16 months) and subtract the Future Value of Monthly Loan Payments.
The Monthly Payments were not provided in the question so the first thing we need to do is to calculate monthly payments
Loan Amount = $1650 000
Interest Rate (r) = 6.5/12 .Interest rate is compounded monthly there for the annual Percentage rate of Interest must be divided by 12
Period (N) = 9 years x 12 = 108 months
Monthly Payments Formulae = (r)Loan Amount/(1 -(1 + r)^-n)
Monthly Payments = (0.065/12)1650 000/(1 - (1 + 0.065/12)^-108)
Monthly Payments = 8937.49989/0.4420139495
Monthly Payments = 20219.949846
MMS Corp would pay $20219.949846 for the loan. we will not round of this answer because we want to get an accurate answer wen we calculate Loan Balance (current potion of debt in 16 months time)
Loan Balance (current potion of debt in 16 months time)
Loan Future Value Formulae = Loan Amount (1 + r)^n
Future Value of Monthly Payments = Payments ((1 + r)^n - 1)/r
Current Porting of debt = Loan Amount (1 + r)^n - Payments ((1 + r)^n - 1)/r
Current Porting of debt = 1650 000(1 + 0.065/12)^16 - 20219.949846((1 + 0.065/12)^16 - 1/(0.065/12)
Current Porting of debt = 1798958.8403 - 337000.31512
Current Porting of debt = 1461958.5252
The Current Portion of debt in month 16 is $1461958.53 (rounded off to two decimals)
