Purchase Solution

# Housing Loan Question : Principle, Interest and Repayment Structure

Not what you're looking for?

A housing loan is taken out for \$250,000. The rate of interest is 6% per annum and the loan is over a 25 year period. The repayments are made monthly.

The formula:
(See attached)

gives An the amount owing at the end of the nth time period. Here n is given in months and r, expressed as a decimal, is the monthly rate of interest on the loan. P is the monthly repayment and A is the amount borrowed.

1) Calculate P for the above data
2) Calculate amount owing on the loan after 10 years
3) At end of 10 years the house buyer inherits \$80,000 which he pays off the loan. Assuming that he continues to make the same monthly repayments, calculate how many months before the loan is fully paid off.

##### Solution Summary

Questions relating to a housing loan relating to principle, interest and repayment structure are answered in detail.

##### Solution Preview

From the condition, we know
A=\$250,000, r=0.06/12=0.005, 25 years is 25*12=300 months.
At the end of the 25 years or 300 months, A(n)=0.
Thus we can find P.
1) ...

##### Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

##### Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.

##### Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.

##### Motivation

This tests some key elements of major motivation theories.

##### Introduction to Finance

This quiz test introductory finance topics.