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gayaneshka [121]
3 years ago
12

Frank purchased his house 16 years ago by taking out a 25-year mortgage for $150,000. the mortgage has a fixed interest rate of

5 percent compounded monthly. if he wants to pay off his mortgage today, how much money does he need? he made his most recent mortgage payment earlier today.​

Business
2 answers:
IRINA_888 [86]3 years ago
8 0

Answer: Since Frank made his most recent EMI payment today, Frank needs 76,136.52 in order to pay off his mortgage today.

We follow these steps to arrive at the answer:

We first calculate the EMI on loan taken out:

The EMI is nothing but P (constant amount paid or received periodically) in the Present Value of an Annuity formula. The formula is

\mathbf{PV_{Annuity} = EMI* \left[ \frac{1 - (1+r)^{-n}}{r} \right]}

Substituting the values from the question we get,

150000 = EMI* \left[ \frac{1 - (1+\frac{0.05}{12})^{-(25*12)}}{\frac{0.05}{12}} \right]

Solving we get,

150000 = EMI* \left[\171.06\right]

\frac{150000}{171.060047} = EMI

\mathbf{EMI = 876.8850623}

We then construct the Amortization table attached below. At the end of 16 years or 192 periods (16*12), we can see that the principal outstanding is $76,136.52.



Andrej [43]3 years ago
4 0
The current value of the mortgage will be given by:
A=P(1+r/100)^n
where:
P=$150,000
r=5%
n=16 years
therefore:
A=150000(1+5/100)^16
A=150000(1.05)^16
A=$201,014.35
If He wants to pay off his mortgage now, he needs $201,014.35
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Explanation:

1.To compute the missing amount of sales, we must look for the data given that has something to do with sales. And the two data given that will give us the hint are the Asset turnover and the total asset.

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To check if the answer is correct:

$600,000 / $400,000 = 1.5 <em>which is equal to the data given</em>

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2. The Sales has been computed above and Gross profit margin on sales is present, these are the hint we needed to compute the Cost of goods sold.

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The additional hint that we have is the Days sales outstanding (based on 365-day year).

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<em>To check our answer:</em>

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Next missing item that we will compute is the accounts payable. The hint that we have that is related to the computation of accounts payable is the Liability to asset ratio.

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<em>Next Step, Compute accounts payable (the only current liability account in the given partial income statement). Long term debt is the only non-current liability on the data given, which means it is the only account that is included in the total liability of $160,000.</em>

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Average inventory = $450,000 / 3.75

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<em>$450,000 / $120,000 = 3.75 which is equal to the data given</em>

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It is the only asset account that is missing after we computed cash, accounts receivable and inventory. Therefore total assets less current assets equals fixed assets.

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