Thursday, March 3, 2011

Stuck On This One

You borrow $400,000 on a standard 30 year fixed mortgage with a stated interest rate of 4.00% per year. It is 24 months from today, and you have just made your 24th payment. The market interest rate for a loan like yours is 6.5% per year. What is the market value of your mortgage? Why does this differ from the principal balance?

2 comments:

  1. JulieMarch 3, 2011 at 1:16 PM

    From Rob:

    First calculate the payment on your mortgage – (roughly 1909.66)

    Then take

    N= 28*12
    I= 6.5%
    PMT = 1909.66

    And calculate for PV

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  2. McCallMarch 5, 2011 at 12:15 AM

    I just got rid of a headache and then got on your blog... now my head hurts again after reading this post. The worst part is I didn't even pretend like I knew what you were talking about! P.S. Loved your wedding pictures!

    ReplyDelete

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