Question 231050: Hello,
Can you please help me figure out the following problem:
On December 31, 1995, a house is purchased with the buyer taking out a 30-year $90,000 mortgage at 9% interest compounded monthly. The mortgage payments are made at the end of each month. Calculate the amount of the monthly payment.
Thank you kindly,
David
Answer by Theo(13342)   (Show Source):
You can put this solution on YOUR website! On December 31, 1995, a house is purchased with the buyer taking out a 30-year $90,000 mortgage at 9% interest compounded monthly. The mortgage payments are made at the end of each month. Calculate the amount of the monthly payment.
Assuming he starts paying in January, the answer should be:
$724.1603553
Let's see how we did.
PAYMENT FOR A PRESENT VALUE
PMT = Payment per Time Period
PV = Present Value
i = Interest Rate per Time Period
n = Number of Time Periods
We set the variables as follows:
PMT is what we want to find.
PV = $90,000 which is the cost of the mortgage.
i = 9% / 100% / 12 = .09/12 = .0075 per time period.
n = 30 years * 12 = 360 time periods.
We plug these values into the formula to get:
Since this equals 724.1603552, the answer we expected is confirmed.
I did it using a financial calculator first and then followed up with the equation. The equation assumes end of time period payments.
Looks like that's your answer.
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