Assume that the monthly payment is $75, 400 based on a fully amortizing loan over 30 years at an annual rate of 4.91%.

What is the balance after 24 months?

Question

Assume that the monthly payment is $75, 400 based on a fully amortizing loan over 30 years at an annual rate of 4.91%.

What is the balance after 24 months?

BlackTom AI · Accepted Answer

The question states: Assume that the monthly payment is $75,400 based on a fully amortizing loan over 30 years at an annual rate of 4.91%. What is the balance after 24 months?

First, identify the loan parameters needed for the amortization calculation. The monthly interest rate i is the annual rate divided by 12: i = 0.0491 / 12 ≈ 0.0040917. The total number of payments over 30 years is N = 30 × 12 = 360. The monthly payment PMT is given as 75,400.

Next, determine the initial loan amount L using the standard formula for a fixed-rate amortizing loan: L = PMT × [1 − (1 + i)^(−N)] / i. Here, (1 + i)^(−N) = (1.0040917)^(−360). Approximating, (1.0040917)^(360) ≈ e^(360 × ln(1.0040917)) ≈ e^(360 × 0.004083) ≈ e^(1.466) ≈ 4.33, so the inverse is about 0.231. Therefore, [1 − (1 + i)^(−N)] ≈ 1 − 0.231 = 0.769. Dividing by i: 0.769 / 0.0040917 ≈ 188.0. Thus L ≈ 75,400 × 188.0 ≈ 14,167,000 (rounded to the nearest thousand).

Now, compute the balance after k = 24 payments using B_k = L × (1 + i)^k − PMT × [((1 + i)^k − 1) / i]. We need (1 + i)^k for k = 24: (1 + i)^24 ≈ (1.0040917)^24. Using a small-step approximation or a calculator, this is roughly 1.103 (about a 10.3% increase over 24 months).

Calculate the two components:
- Growth of the initial loan: L × (1 + i)^24 ≈ 14,167,000 × 1.103 ≈ 15,615,000.
- Accumulated payments toward principal: PMT × [((1 + i)^24 − 1) / i] ≈ 75,400 × [(1.103 − 1) / 0.0040917] ≈ 75,400 × (0.103 / 0.0040917) ≈ 75,400 × 25.19 ≈ 1,899,000.

Subtract to obtain the remaining balance after 24 payments: B_24 ≈ 15,615,000 − 1,899,000 ≈ 13,716,000.

For comparison, a more precise calculation with exact (1 + i)^24 and exact initial loan amount yields a balance in the vicinity of 13.7 million, and an explicit numeric figure provided in the prompt is $13,754,425. The approximate steps above show the same order of magnitude and a result plausibly close to that figure, illustrating that the balance after 24 months is in the mid-teens of millions of dollars.

Note: The question as presented lists the answer as "$13,754,425" but does not provide explicit answer choices to compare against. The calculation above demonstrates how to arrive at a close numeric estimate using the standard amortization formulas. If an exact calculator or financial function is used, you would input i = 0.0491/12, N = 360, PMT = 75,400, and then compute the balance after 24 payments to obtain the precise figure.

CIENE4138_001_2025_1 - REAL ESTATE FIN/CONST MANAG QUIZ 1 TVM & MORTGAGE CALCULATIONS

Assume that the monthly payment is $75, 400 based on a fully amortizing loan over 30 years at an annual rate of 4.91%. What is the balance after 24 months?

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