Compound intrest question?

Question

Hasani take sout a 25 year home loan @11% per anum compounded monthly. Payments to be made in arrear. Just after he makes his 60th payment his intrest rate was reduced to 10.5%. If he continuous to pay the original instalments, how many such full payments does he need to make? do not count the final smaller payment.

Answer 1

Use this formula to find his monthly payment:

PV = A/i - A/[i*(1+i)^N]

where PV is the amount borrowed, A is the monthly payment (solve for this), i is the monthly interest rate (11%/12) and N is the number of payments -- 60.

For this problem it doesn't matter what PV is -- since you really care about the ratio of A to PV. Use something like 1,000,000.

Now set up a spread sheet with the following columns for each month.

1. Starting value (Start with 1MM -- then note it will equal last months ending value for other months).
2. Interest due (= interest rate/12 -- this will either be 11%/12 or 10.5%/12)
3. Payment made -- this is the A you found earlier.
4. Principal paid (A-interest)
5. Ending principal -- = Start - Principal Paid.

Just keep going until it is paid down & keep track of the months.

Good luck.

Answer 2

properly the formula is: A=P(a million+r/n)^nt The variables are: A= quantity eaned P= vital quantity (800) r= fee (.02) n= style of circumstances compunded in a year (4) and t= years compounded (12) utilising this and a calculator, you have to be able to clean up it :)