Thursday

July 24, 2014

July 24, 2014

Posted by **John** on Monday, September 24, 2007 at 10:35am.

a) How much of the mortgage will still be owed after the payment due in August 31, 2004, has been made?

b) Solve the same problem by separating the interest and the principal amounts.

Can you please show them step by step format so I can learn. thank you.

- Engineering Economy -
**economyst**, Tuesday, September 25, 2007 at 9:40amSo the loan (B0) was 150*.8 = 120K

The balance after 1 year and 1 payment would be B1=B0*(1.08)-P.

B2=(B1*(1.08)-P = B0*(1.08)^2 - P*(1.08) - P

....

B15 = B0(1.08)^15 - sum(P*(1.08)^i)

Solve for the annual payment P such that B15=0.

An Excel spreadsheet can handle this otherwise tedious calculation rather quickly.

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