A mortgage loan of $132,000 at 6% compounded semi-annually is to be amortized over 25 years equal monthly payments. What will be the balance outstanding after three years?

Question

Quizplus · Accepted Answer

First, we need to calculate the monthly payment using the formula:
M = P [i(1 + i)^n]/[(1 + i)^n - 1]
Where:
P = principal amount = $132,000
i = interest rate per period = 6%/2 = 0.03
n = total number of payments = 25 years * 12 months/year = 300
M = monthly payment

Plugging in the values, we get:
M = $789.81

After 36 months (3 years), the number of payments made would be:
t = 3 years * 12 months/year = 36

Using the formula for the balance outstanding after t months:
B = P [(1 + i)^n - (1 + i)^t]/[(1 + i)^n - 1]

Plugging in the values we get:
B = $132,000 [(1 + 0.03)^300 - (1 + 0.03)^36]/[(1 + 0.03)^300 - 1]
B = $124,430.18

Therefore, the answer is D) $124,430

A Mortgage Loan of $132,000 at 6% Compounded Semi-Annually Is