Exercise
ABy Admin
Nov 18'23
Answer
Solution: D
The initial level monthly payment is
[[math]]
R=\frac{400,000}{a_{\overline{15 \times 12}|0.09/12}}=\frac{400,000}{a_{\overline{180}|0.075}}=4,057.07.
[[/math]]
The outstanding loan balance after the 36th payment is
[[math]]
B_{3\mathrm{6}}=R a_{\overline{{{160-36}}}|0.0075}=4,057.07a_{\overline{{{144}}}|0.0075}=4,057.07(87.8711)=356,499.17.
[[/math]]
The revised payment is 4,057.07 – 409.88 = 3,647.19. Thus,
[[math]]
\begin{array}{l}{{356,{499}.17=3,647.19 a_{\overline{144}|j/12}}}\\ {{a_{\overline{144}|j/12}=356,499.17/3,647.19=97.7463.}}\end{array}
[[/math]]
Using the financial calculator, j/12 = 0.575%, for j = 6.9%.