what amortization payment would be required every month, at 12% interest, to pay off a $125,000 mortgage in 10 years? round your answer to the nearest cent. can you work the steps to this problem for me so i can see the problem clearly?
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Sure! To calculate the amortization payment for a mortgage, you can use the formula:
A = P * (r * (1+r)^n) / ((1+r)^n - 1)
Where:
A = Amortization payment
P = Principal amount (in this case, $125,000)
r = Monthly interest rate (12% annual interest rate / 12 months)
n = Number of payments (10 years * 12 months)
Step 1: Calculate the monthly interest rate:
r = 12% / 12 months = 1% per month = 0.01
Step 2: Calculate the number of payments:
n = 10 years * 12 months = 120 months
Step 3: Substitute the values into the formula and solve for A:
A = 125,000 * (0.01 * (1+0.01)^120) / ((1+0.01)^120 - 1)
≈ 125,000 * (0.01 * 14.971) / (14.971 - 1)
≈ 125,000 * (0.14971) / 13.971
≈ 125,000 * 0.0107
≈ 1,337.50
So, the monthly amortization payment required to pay off the $125,000 mortgage in 10 years at a 12% interest rate would be approximately $1,337.50.