Twelve years ago, you borrowed $180,000 for 30 year at 7% annum interest. What is the current principal balance?

Question

Quizplus · Accepted Answer

The formula to calculate the remaining balance on a loan with fixed monthly payments is:
B = L[(1 + r)^n - (1 + r)^p]/[(1 + r)^n - 1]
where
B = remaining balance
L = original loan amount
r = monthly interest rate = 7%/12 = 0.0058333
n = total number of months = 30 years x 12 = 360
p = number of payments already made = 12 years x 12 = 144
Plugging in the values:
B = 180000[(1 + 0.0058333)^360 - (1 + 0.0058333)^144]/[(1 + 0.0058333)^360 - 1]
B = $146,848.43
Therefore, the correct answer is (A) $146,848.

Twelve Years Ago, You Borrowed $180,000 for 30 Year at 7