The interest rate on a 30 year mortgage is 12% compounded monthly. the mortgage is paid by monthly payments of 700. Suppose an additional 1000 is paid at the end of each year to payoff loan early, compute for outstanding balance at the end of 10 years. Use prospective method and retrospective method.
Using the prospective method, this is what i came up with:
700 (a_240) + 1000 (a_20) = 81,619.14
a is PresentValue annuity immediate with n=240 and n=20
i is .01
my loan is 700 (a_360) = 68,052.83
i know i'm doing something wrong coz when i use the retrospective, it doesn't equate to that. using retrospective:
68,052.83 (1.01)^120 - 700 (s_120) - 1000 (s_10) = 53,111.38
s is FutureValue annuity immediate with n=120 and n=10
please help :s thanks!
Using the prospective method, this is what i came up with:
700 (a_240) + 1000 (a_20) = 81,619.14
a is PresentValue annuity immediate with n=240 and n=20
i is .01
my loan is 700 (a_360) = 68,052.83
i know i'm doing something wrong coz when i use the retrospective, it doesn't equate to that. using retrospective:
68,052.83 (1.01)^120 - 700 (s_120) - 1000 (s_10) = 53,111.38
s is FutureValue annuity immediate with n=120 and n=10
please help :s thanks!