# Economics Future Loan Question

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account_balance_wallet \$5

Need help on part B. Answers are given, just can't arrive at the answer.

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You purchase a house and take out a \$100,000 loan with a 30-year term at 12% nominal annual interest rate (monthly compounding)

b)If you pay off the loan at the end of 5 years (after 60th payment), how much will you have to pay the bank at that time?

Any help on part B would be greatly appreciated. Would really help a college student out

Sep 12th, 2015

You use the FV of annuity formula. compounding monthly

FV =

Sep 12th, 2015

Sorry not future. You use compound formula

A= P (1+R)^n

A= 100,000 (1+0.01)^60 = 181,669.67

Your answer cannot be correct. There is no way a loan amount paid can be less than theamount borrowed

Sep 12th, 2015

Thanks for the reply. So I actually tried that using FV= C [ (1+i)^n -1 ] / i

I plugged in 1028.61 for the C value, .12 for interest, and 60 for n. The value I got is very large, 7.68 E6. Am I making a stupid mistake somewhere here? I also tried it with n=5 with no luck. Thanks again for the help

Sep 12th, 2015

What you're saying makes sense. The answer is from the textbook but I will check it with my professor. I correctly calculated the \$1028.61 value using a somewhat lengthy formula. I'll let you know what I find out

Sep 12th, 2015

You are welcome here is an easier formula for part 1 loan repayment.docx

Sep 12th, 2015

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Sep 12th, 2015
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Sep 12th, 2015
Nov 21st, 2017
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