Financial Project

Financial Project

Part 1 Answers

(a)Explain your strategy for solving the problem.

The current outstanding balance of the loan is given in the question stated above i.e. $130,794.68, so we would only use the annuity formula in order to resolve the question to determine the monthly payment for the 20 years time period at the given interest rate of 5.75%.

(b)Present a step-by-step solution of the problem.

130,794.68 = P[ 1 - (1+0.0575/12)^(-12*20)] / (0.0575/12)

Now we will solve the above stated equation to determine the vale of P.

Here, P = 918.29 [principal + interest, excluding escrow]

The value of current principal and interest is calculated as ...