01:640:106 Lecture Notes - Lecture 14: Refinancing
28 Nov 2016
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Payment number payment amount (made at end of year) Interest amount (based on balance at beginning of year) Principal amount (by which the remaining balance is reduced) . 70 = sh: look again at pat and sam"s ,000 mortgage on a ,000 house, from the last section. They can borrow this amount from the bank at 6% interest, compounded monthly. We competed that if they get a 30-year mortgage, their monthly payment will be ,798. 65 as follows: Solve ,000 = pmt x an|i , where n = 360 and i = . 005. Pmt = ,798. 65 payment number payment amount interest amount principal amount remaining balance. 299,099. 57 payment number payment amount interest amount principal amount remaining balance. Solving for a with annuities: suppose you have a bank account where you can earn 6% compound interest per year, and you can deposit per month into the account. 11 = 1. 005^n ln(11) = ln(1. 005^n) ln(11) = n x ln(1. 005) n = ln(11)/ln(1. 005)
