Financial Math: Loan repayment schedules

During this module we have learned a few useful financial formulas. Here is another one: This formula computes the monthly mortgage payment (principal + interest).

M-monthly mortgage payment

r-annual interest rate

n-number of payments per year

P-Principal (amount borrowed)

t-number of years

Write a response that completes the following tasks and meets the list of requirements that follow to build your response for this Critical Thinking Assignment:

First, check if you can use this formula correctly: If you borrow 300,000 at 3.75% annual rate for 30yrs, then mortgage payment (principal + interest) should come out to $1,389.35.

Consider a case where you borrow 235,000 at 3.85% annual rate for 30 years fixed.

1. Compute the mortgage payment using the above formula.

2. Construct the re-payment schedule using Excel. Consider viewing this video for some Excel short-cuts and hints: Repayment Schedule in Excel

3. What is the total payment at the end of 30 years? How much of it is just interest?

4. Now respond to questions 1, 2, and 3, but for a 15-year mortgage.

5. In your opinion, what are the pros and cons of each option (30-year mortgage vs. 15-year mortgage)?

Requirements:

• Your paper should be 2-3 pages in length and cite and integrate at least one credible outside source.

• Include a title page, an introduction, a body, a conclusion, and a Reference list.

• The introduction should summarize the problem and state what approach and method will be applied to solve it.

• The body of your paper should answer the questions posed in the problem, explain how you approached and answered the question or solved the problem, and for each question, show all steps involved.

• The conclusion should summarize your findings and what you have determined from the data and your analysis, with a broader or personal perspective in mind when applicable.

• As with all written assignments, provide in-text citations and a reference page.

• Include any tables of data or calculations, calculated values, and/or graphs associated with this problem in the body of your assignment.

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