Question

2. The owner and bank have agreed to convert the construction mortgage into a permanent mortgage when construction is done. The permanent mortgage will be for the $13.2 million. The term of the mortgage is 10 years and the annual interest rate is 6.75%, with principal and interest to be paid off monthly over the 10 year period. a. What is the monthly payment

Answer 1

Answer:

Monthly payment is $151,567.83

Explanation:

Monthly Payment can be calculated using following formula

Value of Mortgage = Monthly payment x ( 1 - ( 1 + Monthly Interest rate )^-Numbers of months / Monthly iNterest rate

Where

Value of Mortgage = $13,200,000

Monthly Payment = ?

MOnthly Interest rate = 6.75% / 12 = 0.5625%

Numbers of months = Tem of Mortgage x 12 = 10 years x 12 = 120 months

Placing values in the formula

$13,200,000 = Monthly payment x ( 1 - ( 1 + 0.5625% )^-120 / 0.5625%

$13,200,000 = Monthly payment x 87.08972

Monthly payment = $13,200,000 / 87.08972

Monthly payment = $151,567.83