Question

Consider the first payment against a $200,000 mortgage that last for 25 years. Fixed repayments are made on a monthly basis. The first row of the amortization schedule is shown below. Payment # Payment Interest Debt Payment Balance 1 d 716.67 P1 bi 2 Calculate d, the fixed monthly payments that are made. Round your answer to the nearest cent.
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Answer 1

• The value of d = $1088.63
• fixed monthly payments made = $372

Given that :

Present value ( PV ) $200,000

Period = 25 years

Total period ( n ) = 25 * 12 = 300

also PMT is done monthly

∴ monthly interest rate = ( 716.67 / 200,000 ) * 100 = 0.358% ( r )

i) Next step : Calculate the value of PMT

using the equation below

$PMT = [\frac{PV}{\frac{1-(1+r)^{-n} }{r} } ]$     where :  PV = $200,000, r = 0.358% , n = 300

input values into equation

∴ d = PMT  = $1088.63

ii) Fixed monthly payments

=  d - 716.67

= 1088.63 - 716.67  = $372

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