Can Please someone check as per below I posted this yesterday and Drwls Answered and I post back the solution.
Thanks
Amortization of a $1000 Loan
Interest Monthly payment
rate
15yr 20yr 25yr 30yr
9.5% $10.45 $9.33 $8.73 $8.41
10.0% $10.75 $9.66 $9.09 $8.78
10.5% $11.06 $9.99 $9.45 $9.15
11.0% $11.37 $10.33 $9.81 $9.53
11.5% $11.69 $10.66 $10.16 $9.90
12.0% $12.01 $11.01 $10.53 $10.29
12.5% $12.33 $11.36 $10.90 $10.67
13.0% $12.66 $11.72 $11.28 $11.06
a. What is the monthly payment on a 25-year loan of $125,000 if the
annual interest is 9.5%
b. What are the total interest charges over the life of the loan?
For Further Reading
Maths - drwls, Wednesday, March 12, 2008 at 3:00pm
This looks like an exercise in Table reading, but the table is hard to read.
The 25-yr load entry in the 9.5% interest row is $8.73. That would be the monthly payment. 25 years is 300 months, so the total amount repaid would be $8.73 times that, or $2619.00
Of that amount, $1619.00 would be interest charges over the life of the loan. The rest is the return of the $1000 principal.
Maths - Jen, Wednesday, March 12, 2008 at 4:59pm
What is the monthly payment on a 25-year loan of $125,000 if the
annual interest is 9.5%
So for the 125,000 loan
monthly payment will be 8.73*125000/1000 = 1091.25
What are the total interest charges over the life of the loan?
1091.25*300 = 327375
Total Interest = 327375-12500 = 202375
Is this correct
I agree with your calculations
Thank You
To check if the calculations provided are correct, we can go through the steps mentioned by the previous users.
a. What is the monthly payment on a 25-year loan of $125,000 if the annual interest is 9.5%?
According to drwls' response, the monthly payment for a 25-year loan at a 9.5% interest rate is $8.73. So, to calculate the monthly payment for a $125,000 loan, we can use the formula:
Monthly payment = (Loan amount * Monthly interest rate) / (1 - (1 + Monthly interest rate)^(-Total number of months))
In this case, the Loan amount is $125,000, the Monthly interest rate is (9.5% / 100) / 12 = 0.0079167, and the Total number of months is 25 * 12 = 300.
Substituting these values into the formula:
Monthly payment = (125,000 * 0.0079167) / (1 - (1 + 0.0079167)^(-300))
Monthly payment ≈ $1091.14
So, the previous calculation by Jen is very close, with a small rounding difference. The correct monthly payment for a 25-year loan of $125,000 at a 9.5% interest rate is approximately $1091.14.
b. What are the total interest charges over the life of the loan?
Finding the total interest charges over the life of the loan requires multiplying the monthly payment by the total number of months. According to Jen's calculation, the monthly payment is $1091.25, and the total number of months is 300.
Total Interest = Monthly payment * Total number of months
Total Interest = $1091.25 * 300
Total Interest = $327,375
However, there seems to be a typo or miscalculation in Jen's second step where the value $12500 is subtracted from the product. This subtraction should not be part of the calculation.
So, the correct total interest charges over the life of the loan would be $327,375, which matches the calculation provided by Jen initially.
In summary, it seems that Jen's calculations are correct except for the small rounding difference in the monthly payment and the unnecessary subtraction in the calculation of the total interest charges.