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14 January, 13:56

An $11,000 mortgage has a 30-year term (requiring monthly payments) and a 6% nominal interest rate. (a) What is the monthly payment? (b) What will be the remaining balance on her loan immediately after making her 12th payment? (c) How much interest is paid in Month 13? How much principal?

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  1. 14 January, 15:00
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    a) Monthly payment = $65.95

    b) Remaining balance on her loan after making 12th payment = 11,000 - (65.95 x 12) = $10208.6

    c) Interest paid in month 13 = 10208.6 * 0.5% = $51.043

    Principal paid in month 13 = $65.95 - 51.043 = $14.907

    Explanation:

    Using financial calculator:

    PV = 11,000

    n = 30 years = 360 months

    i/r = 6%/year = 0.5% / month

    FV = 0

    PMT = ? (Monthly payment = ?)

    a) Monthly payment = $65.95

    b) Remaining balance on her loan after making 12th payment = 11,000 - (65.95 x 12) = $10208.6

    c) Interest paid in month 13 = 10208.6 * 0.5% = $51.043

    Principal paid in month 13 = $65.95 - 51.043 = $14.907
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