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What is your outstanding balance

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Reference no: EM133109828

Question - You wish to take a loan of $500,000 for 3 years. The loan will be repaid monthly in equal installments starting a month from today.  The APR on the loan is 4%, compounded monthly.

Required -

a) What should be the monthly payment on the loan?

b) Of the first payment, how much of it is paid towards interest and how much of it is paid towards principal?

c) After two years of payments, you received a large bonus and you wish to close the loan. What is your outstanding balance?

d) The large bonus that you received in part (iii) is only $50,000 and so it is not enough to fully close the loan. Assuming that you will use the the $50,000 to reduce the outstanding balance, by how much will you reduce your payments on the remaining 12 months?

Reference no: EM133109828

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