Suppose you take out a $117,000, 20-year mortgage loan to buy a condo. The interest rate on the loan is 5%. To keep things simple,we will assume you make payments on the loan annually at the end of each year.a. What is your annual payment on the loan?b. Construct a mortgage amortization.c. What fraction of your initial loan payment is interest?d. What fraction of your initial loan payment is amortization?e. What is the total of the loan amount paid off after 10 years (halfway through the life of the loan)?f. If the inflation rate is 3%, what is the real value of the first (year-end) payment?g. If the inflation rate is 3%, what is the real value of the last (year-end) payment?h. Now assume the inflation rate is 6% and the real interest rate on the loan is unchanged. What must be the new nominal interestrate?i-1. Recompute the amortization table.i-2. What is the real value of the first (year-end) payment in this high-inflation scenario?j. What is the real value of the last payment in this high-inflation scenario?Complete this question by entering your answers in the tabs below.Req AReq BReq C and D Req E to Gi-2. Real value of the first paymentj. Real value of the first paymentReq H< Req 11Req 11i-2. What is the real value of the first (year-end) payment in this high-inflation scenario?j. What is the real value of the last ayment in this high-inflation scenario?Note: Do not round intermediate calculations. Round your answers to 2 decimal places.Req 12 and JReq 12 and J >

Answered: a. What is your annual payment on the…

a. What is your annual payment on the loan? b. Construct a mortgage amortization. c. What fraction of your initial loan payment is interest?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section4.17: Amortized Loans

Problem 1ST

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Question

Suppose you take out a $117,000, 20-year mortgage loan to buy a condo. The interest rate on the loan is 5%. To keep things simple,
we will assume you make payments on the loan annually at the end of each year.
a. What is your annual payment on the loan?
b. Construct a mortgage amortization.
c. What fraction of your initial loan payment is interest?
d. What fraction of your initial loan payment is amortization?
e. What is the total of the loan amount paid off after 10 years (halfway through the life of the loan)?
f. If the inflation rate is 3%, what is the real value of the first (year-end) payment?
g. If the inflation rate is 3%, what is the real value of the last (year-end) payment?
h. Now assume the inflation rate is 6% and the real interest rate on the loan is unchanged. What must be the new nominal interest
rate?
i-1. Recompute the amortization table.
i-2. What is the real value of the first (year-end) payment in this high-inflation scenario?
j. What is the real value of the last payment in this high-inflation scenario?
Complete this question by entering your answers in the tabs below.
Req A
Req B
Req C and D Req E to G
i-2. Real value of the first payment
j. Real value of the first payment
Req H
< Req 11
Req 11
i-2. What is the real value of the first (year-end) payment in this high-inflation scenario?
j. What is the real value of the last ayment in this high-inflation scenario?
Note: Do not round intermediate calculations. Round your answers to 2 decimal places.
Req 12 and J
Req 12 and J >

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