Question 1
| Loan Initial Balance |
$250,000 |
| Annual Interest Rate |
5% |
| Years to maturity |
30 |
| Number of payments per year |
12 |
| Monthly Mortgage Payment of the principal and interest |
$1,342.05 |
The monthly mortgage payment of principal and interest for the loan is calculated using the Excel “PMT” function as $1342.05. Monthly mortgage payments are calculated as ordinary annuities ( (Brickner & Mahoney, 2018).
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The monthly mortgage payments can only be afforded by individuals who have high incomes. The federal minimum wages in the United States are set at $7.25 per hour (US Department of Labor, n.d.). The monthly minimum wages in the US in 2020 were estimated at $1256.7 (United States (USA) National Minimum Wage - NMW 2020, 2020). A person earning the minimum wage cannot afford such payments since the payments are higher than the minimum wage earnings.
Question 2: Amortization Table for the Loan in Question 1
| Period (No. of Months) | Monthly Payment | Interest | Principal Payment | Balance |
|
1 |
$1,342.05 |
$1,041.67 |
$300.39 |
$249,699.61 |
|
2 |
$1,342.05 |
$1,040.42 |
$301.64 |
$249,397.97 |
|
3 |
$1,342.05 |
$1,039.16 |
$302.90 |
$249,095.08 |
|
4 |
$1,342.05 |
$1,037.90 |
$304.16 |
$248,790.92 |
|
5 |
$1,342.05 |
$1,036.63 |
$305.43 |
$248,485.49 |
|
6 |
$1,342.05 |
$1,035.36 |
$306.70 |
$248,178.80 |
|
7 |
$1,342.05 |
$1,034.08 |
$307.98 |
$247,870.82 |
|
8 |
$1,342.05 |
$1,032.80 |
$309.26 |
$247,561.56 |
|
9 |
$1,342.05 |
$1,031.51 |
$310.55 |
$247,251.01 |
|
10 |
$1,342.05 |
$1,030.21 |
$311.84 |
$246,939.17 |
|
11 |
$1,342.05 |
$1,028.91 |
$313.14 |
$246,626.03 |
|
12 |
$1,342.05 |
$1,027.61 |
$314.45 |
$246,311.59 |
|
13 |
$1,342.05 |
$1,026.30 |
$315.76 |
$245,995.83 |
|
14 |
$1,342.05 |
$1,024.98 |
$317.07 |
$245,678.76 |
|
15 |
$1,342.05 |
$1,023.66 |
$318.39 |
$245,360.37 |
|
16 |
$1,342.05 |
$1,022.33 |
$319.72 |
$245,040.65 |
|
17 |
$1,342.05 |
$1,021.00 |
$321.05 |
$244,719.60 |
|
18 |
$1,342.05 |
$1,019.66 |
$322.39 |
$244,397.21 |
|
19 |
$1,342.05 |
$1,018.32 |
$323.73 |
$244,073.47 |
|
20 |
$1,342.05 |
$1,016.97 |
$325.08 |
$243,748.39 |
|
21 |
$1,342.05 |
$1,015.62 |
$326.44 |
$243,421.96 |
|
22 |
$1,342.05 |
$1,014.26 |
$327.80 |
$243,094.16 |
|
23 |
$1,342.05 |
$1,012.89 |
$329.16 |
$242,765.00 |
|
24 |
$1,342.05 |
$1,011.52 |
$330.53 |
$242,434.47 |
|
25 |
$1,342.05 |
$1,010.14 |
$331.91 |
$242,102.56 |
|
26 |
$1,342.05 |
$1,008.76 |
$333.29 |
$241,769.26 |
|
27 |
$1,342.05 |
$1,007.37 |
$334.68 |
$241,434.58 |
|
28 |
$1,342.05 |
$1,005.98 |
$336.08 |
$241,098.50 |
|
29 |
$1,342.05 |
$1,004.58 |
$337.48 |
$240,761.03 |
|
30 |
$1,342.05 |
$1,003.17 |
$338.88 |
$240,422.14 |
|
31 |
$1,342.05 |
$1,001.76 |
$340.30 |
$240,081.85 |
|
32 |
$1,342.05 |
$1,000.34 |
$341.71 |
$239,740.14 |
|
33 |
$1,342.05 |
$998.92 |
$343.14 |
$239,397.00 |
|
34 |
$1,342.05 |
$997.49 |
$344.57 |
$239,052.43 |
|
35 |
$1,342.05 |
$996.05 |
$346.00 |
$238,706.43 |
|
36 |
$1,342.05 |
$994.61 |
$347.44 |
$238,358.99 |
|
37 |
$1,342.05 |
$993.16 |
$348.89 |
$238,010.10 |
|
38 |
$1,342.05 |
$991.71 |
$350.35 |
$237,659.75 |
|
39 |
$1,342.05 |
$990.25 |
$351.81 |
$237,307.94 |
|
40 |
$1,342.05 |
$988.78 |
$353.27 |
$236,954.67 |
|
41 |
$1,342.05 |
$987.31 |
$354.74 |
$236,599.93 |
|
42 |
$1,342.05 |
$985.83 |
$356.22 |
$236,243.71 |
|
43 |
$1,342.05 |
$984.35 |
$357.71 |
$235,886.00 |
|
44 |
$1,342.05 |
$982.86 |
$359.20 |
$235,526.81 |
|
45 |
$1,342.05 |
$981.36 |
$360.69 |
$235,166.12 |
|
46 |
$1,342.05 |
$979.86 |
$362.20 |
$234,803.92 |
|
47 |
$1,342.05 |
$978.35 |
$363.70 |
$234,440.22 |
|
48 |
$1,342.05 |
$976.83 |
$365.22 |
$234,075.00 |
|
49 |
$1,342.05 |
$975.31 |
$366.74 |
$233,708.26 |
|
50 |
$1,342.05 |
$973.78 |
$368.27 |
$233,339.99 |
|
51 |
$1,342.05 |
$972.25 |
$369.80 |
$232,970.18 |
|
52 |
$1,342.05 |
$970.71 |
$371.34 |
$232,598.84 |
|
53 |
$1,342.05 |
$969.16 |
$372.89 |
$232,225.94 |
|
54 |
$1,342.05 |
$967.61 |
$374.45 |
$231,851.50 |
|
55 |
$1,342.05 |
$966.05 |
$376.01 |
$231,475.49 |
|
56 |
$1,342.05 |
$964.48 |
$377.57 |
$231,097.92 |
|
57 |
$1,342.05 |
$962.91 |
$379.15 |
$230,718.77 |
|
58 |
$1,342.05 |
$961.33 |
$380.73 |
$230,338.05 |
|
59 |
$1,342.05 |
$959.74 |
$382.31 |
$229,955.74 |
|
60 |
$1,342.05 |
$958.15 |
$383.91 |
$229,571.83 |
|
61 |
$1,342.05 |
$956.55 |
$385.50 |
$229,186.33 |
|
62 |
$1,342.05 |
$954.94 |
$387.11 |
$228,799.21 |
|
63 |
$1,342.05 |
$953.33 |
$388.72 |
$228,410.49 |
|
64 |
$1,342.05 |
$951.71 |
$390.34 |
$228,020.15 |
|
65 |
$1,342.05 |
$950.08 |
$391.97 |
$227,628.18 |
|
66 |
$1,342.05 |
$948.45 |
$393.60 |
$227,234.57 |
|
67 |
$1,342.05 |
$946.81 |
$395.24 |
$226,839.33 |
|
68 |
$1,342.05 |
$945.16 |
$396.89 |
$226,442.44 |
|
69 |
$1,342.05 |
$943.51 |
$398.54 |
$226,043.90 |
|
70 |
$1,342.05 |
$941.85 |
$400.20 |
$225,643.69 |
|
71 |
$1,342.05 |
$940.18 |
$401.87 |
$225,241.82 |
|
72 |
$1,342.05 |
$938.51 |
$403.55 |
$224,838.27 |
|
73 |
$1,342.05 |
$936.83 |
$405.23 |
$224,433.04 |
|
74 |
$1,342.05 |
$935.14 |
$406.92 |
$224,026.13 |
|
75 |
$1,342.05 |
$933.44 |
$408.61 |
$223,617.52 |
|
76 |
$1,342.05 |
$931.74 |
$410.31 |
$223,207.20 |
|
77 |
$1,342.05 |
$930.03 |
$412.02 |
$222,795.18 |
|
78 |
$1,342.05 |
$928.31 |
$413.74 |
$222,381.44 |
|
79 |
$1,342.05 |
$926.59 |
$415.46 |
$221,965.97 |
|
80 |
$1,342.05 |
$924.86 |
$417.20 |
$221,548.78 |
|
81 |
$1,342.05 |
$923.12 |
$418.93 |
$221,129.84 |
|
82 |
$1,342.05 |
$921.37 |
$420.68 |
$220,709.16 |
|
83 |
$1,342.05 |
$919.62 |
$422.43 |
$220,286.73 |
|
84 |
$1,342.05 |
$917.86 |
$424.19 |
$219,862.54 |
|
85 |
$1,342.05 |
$916.09 |
$425.96 |
$219,436.58 |
|
86 |
$1,342.05 |
$914.32 |
$427.73 |
$219,008.84 |
|
87 |
$1,342.05 |
$912.54 |
$429.52 |
$218,579.33 |
|
88 |
$1,342.05 |
$910.75 |
$431.31 |
$218,148.02 |
|
89 |
$1,342.05 |
$908.95 |
$433.10 |
$217,714.91 |
|
90 |
$1,342.05 |
$907.15 |
$434.91 |
$217,280.01 |
|
91 |
$1,342.05 |
$905.33 |
$436.72 |
$216,843.29 |
|
92 |
$1,342.05 |
$903.51 |
$438.54 |
$216,404.74 |
|
93 |
$1,342.05 |
$901.69 |
$440.37 |
$215,964.38 |
|
94 |
$1,342.05 |
$899.85 |
$442.20 |
$215,522.17 |
|
95 |
$1,342.05 |
$898.01 |
$444.04 |
$215,078.13 |
|
96 |
$1,342.05 |
$896.16 |
$445.90 |
$214,632.23 |
|
97 |
$1,342.05 |
$894.30 |
$447.75 |
$214,184.48 |
|
98 |
$1,342.05 |
$892.44 |
$449.62 |
$213,734.86 |
|
99 |
$1,342.05 |
$890.56 |
$451.49 |
$213,283.37 |
|
100 |
$1,342.05 |
$888.68 |
$453.37 |
$212,830.00 |
|
101 |
$1,342.05 |
$886.79 |
$455.26 |
$212,374.74 |
|
102 |
$1,342.05 |
$884.89 |
$457.16 |
$211,917.58 |
|
103 |
$1,342.05 |
$882.99 |
$459.06 |
$211,458.51 |
|
104 |
$1,342.05 |
$881.08 |
$460.98 |
$210,997.53 |
|
105 |
$1,342.05 |
$879.16 |
$462.90 |
$210,534.64 |
|
106 |
$1,342.05 |
$877.23 |
$464.83 |
$210,069.81 |
|
107 |
$1,342.05 |
$875.29 |
$466.76 |
$209,603.05 |
|
108 |
$1,342.05 |
$873.35 |
$468.71 |
$209,134.34 |
|
109 |
$1,342.05 |
$871.39 |
$470.66 |
$208,663.68 |
|
110 |
$1,342.05 |
$869.43 |
$472.62 |
$208,191.06 |
|
111 |
$1,342.05 |
$867.46 |
$474.59 |
$207,716.46 |
|
112 |
$1,342.05 |
$865.49 |
$476.57 |
$207,239.90 |
|
113 |
$1,342.05 |
$863.50 |
$478.55 |
$206,761.34 |
|
114 |
$1,342.05 |
$861.51 |
$480.55 |
$206,280.79 |
|
115 |
$1,342.05 |
$859.50 |
$482.55 |
$205,798.24 |
|
116 |
$1,342.05 |
$857.49 |
$484.56 |
$205,313.68 |
|
117 |
$1,342.05 |
$855.47 |
$486.58 |
$204,827.10 |
|
118 |
$1,342.05 |
$853.45 |
$488.61 |
$204,338.49 |
|
119 |
$1,342.05 |
$851.41 |
$490.64 |
$203,847.85 |
|
120 |
$1,342.05 |
$849.37 |
$492.69 |
$203,355.16 |
|
121 |
$1,342.05 |
$847.31 |
$494.74 |
$202,860.42 |
|
122 |
$1,342.05 |
$845.25 |
$496.80 |
$202,363.62 |
|
123 |
$1,342.05 |
$843.18 |
$498.87 |
$201,864.75 |
|
124 |
$1,342.05 |
$841.10 |
$500.95 |
$201,363.79 |
|
125 |
$1,342.05 |
$839.02 |
$503.04 |
$200,860.76 |
|
126 |
$1,342.05 |
$836.92 |
$505.13 |
$200,355.62 |
|
127 |
$1,342.05 |
$834.82 |
$507.24 |
$199,848.38 |
|
128 |
$1,342.05 |
$832.70 |
$509.35 |
$199,339.03 |
|
129 |
$1,342.05 |
$830.58 |
$511.47 |
$198,827.56 |
|
130 |
$1,342.05 |
$828.45 |
$513.61 |
$198,313.95 |
|
131 |
$1,342.05 |
$826.31 |
$515.75 |
$197,798.20 |
|
132 |
$1,342.05 |
$824.16 |
$517.89 |
$197,280.31 |
|
133 |
$1,342.05 |
$822.00 |
$520.05 |
$196,760.26 |
|
134 |
$1,342.05 |
$819.83 |
$522.22 |
$196,238.04 |
|
135 |
$1,342.05 |
$817.66 |
$524.40 |
$195,713.64 |
|
136 |
$1,342.05 |
$815.47 |
$526.58 |
$195,187.06 |
|
137 |
$1,342.05 |
$813.28 |
$528.77 |
$194,658.29 |
|
138 |
$1,342.05 |
$811.08 |
$530.98 |
$194,127.31 |
|
139 |
$1,342.05 |
$808.86 |
$533.19 |
$193,594.12 |
|
140 |
$1,342.05 |
$806.64 |
$535.41 |
$193,058.71 |
|
141 |
$1,342.05 |
$804.41 |
$537.64 |
$192,521.06 |
|
142 |
$1,342.05 |
$802.17 |
$539.88 |
$191,981.18 |
|
143 |
$1,342.05 |
$799.92 |
$542.13 |
$191,439.05 |
|
144 |
$1,342.05 |
$797.66 |
$544.39 |
$190,894.66 |
|
145 |
$1,342.05 |
$795.39 |
$546.66 |
$190,348.00 |
|
146 |
$1,342.05 |
$793.12 |
$548.94 |
$189,799.06 |
|
147 |
$1,342.05 |
$790.83 |
$551.22 |
$189,247.83 |
|
148 |
$1,342.05 |
$788.53 |
$553.52 |
$188,694.31 |
|
149 |
$1,342.05 |
$786.23 |
$555.83 |
$188,138.49 |
|
150 |
$1,342.05 |
$783.91 |
$558.14 |
$187,580.34 |
|
151 |
$1,342.05 |
$781.58 |
$560.47 |
$187,019.87 |
|
152 |
$1,342.05 |
$779.25 |
$562.80 |
$186,457.07 |
|
153 |
$1,342.05 |
$776.90 |
$565.15 |
$185,891.92 |
|
154 |
$1,342.05 |
$774.55 |
$567.50 |
$185,324.41 |
|
155 |
$1,342.05 |
$772.19 |
$569.87 |
$184,754.55 |
|
156 |
$1,342.05 |
$769.81 |
$572.24 |
$184,182.30 |
|
157 |
$1,342.05 |
$767.43 |
$574.63 |
$183,607.67 |
|
158 |
$1,342.05 |
$765.03 |
$577.02 |
$183,030.65 |
|
159 |
$1,342.05 |
$762.63 |
$579.43 |
$182,451.23 |
|
160 |
$1,342.05 |
$760.21 |
$581.84 |
$181,869.38 |
|
161 |
$1,342.05 |
$757.79 |
$584.26 |
$181,285.12 |
|
162 |
$1,342.05 |
$755.35 |
$586.70 |
$180,698.42 |
|
163 |
$1,342.05 |
$752.91 |
$589.14 |
$180,109.28 |
|
164 |
$1,342.05 |
$750.46 |
$591.60 |
$179,517.68 |
|
165 |
$1,342.05 |
$747.99 |
$594.06 |
$178,923.61 |
|
166 |
$1,342.05 |
$745.52 |
$596.54 |
$178,327.08 |
|
167 |
$1,342.05 |
$743.03 |
$599.02 |
$177,728.05 |
|
168 |
$1,342.05 |
$740.53 |
$601.52 |
$177,126.53 |
|
169 |
$1,342.05 |
$738.03 |
$604.03 |
$176,522.50 |
|
170 |
$1,342.05 |
$735.51 |
$606.54 |
$175,915.96 |
|
171 |
$1,342.05 |
$732.98 |
$609.07 |
$175,306.89 |
|
172 |
$1,342.05 |
$730.45 |
$611.61 |
$174,695.28 |
|
173 |
$1,342.05 |
$727.90 |
$614.16 |
$174,081.12 |
|
174 |
$1,342.05 |
$725.34 |
$616.72 |
$173,464.41 |
|
175 |
$1,342.05 |
$722.77 |
$619.29 |
$172,845.12 |
|
176 |
$1,342.05 |
$720.19 |
$621.87 |
$172,223.26 |
|
177 |
$1,342.05 |
$717.60 |
$624.46 |
$171,598.80 |
|
178 |
$1,342.05 |
$714.99 |
$627.06 |
$170,971.74 |
|
179 |
$1,342.05 |
$712.38 |
$629.67 |
$170,342.07 |
|
180 |
$1,342.05 |
$709.76 |
$632.30 |
$169,709.77 |
|
181 |
$1,342.05 |
$707.12 |
$634.93 |
$169,074.84 |
|
182 |
$1,342.05 |
$704.48 |
$637.58 |
$168,437.27 |
|
183 |
$1,342.05 |
$701.82 |
$640.23 |
$167,797.03 |
|
184 |
$1,342.05 |
$699.15 |
$642.90 |
$167,154.13 |
|
185 |
$1,342.05 |
$696.48 |
$645.58 |
$166,508.56 |
|
186 |
$1,342.05 |
$693.79 |
$648.27 |
$165,860.29 |
|
187 |
$1,342.05 |
$691.08 |
$650.97 |
$165,209.32 |
|
188 |
$1,342.05 |
$688.37 |
$653.68 |
$164,555.64 |
|
189 |
$1,342.05 |
$685.65 |
$656.41 |
$163,899.23 |
|
190 |
$1,342.05 |
$682.91 |
$659.14 |
$163,240.09 |
|
191 |
$1,342.05 |
$680.17 |
$661.89 |
$162,578.20 |
|
192 |
$1,342.05 |
$677.41 |
$664.64 |
$161,913.56 |
|
193 |
$1,342.05 |
$674.64 |
$667.41 |
$161,246.14 |
|
194 |
$1,342.05 |
$671.86 |
$670.20 |
$160,575.95 |
|
195 |
$1,342.05 |
$669.07 |
$672.99 |
$159,902.96 |
|
196 |
$1,342.05 |
$666.26 |
$675.79 |
$159,227.17 |
|
197 |
$1,342.05 |
$663.45 |
$678.61 |
$158,548.56 |
|
198 |
$1,342.05 |
$660.62 |
$681.44 |
$157,867.13 |
|
199 |
$1,342.05 |
$657.78 |
$684.27 |
$157,182.85 |
|
200 |
$1,342.05 |
$654.93 |
$687.13 |
$156,495.73 |
|
201 |
$1,342.05 |
$652.07 |
$689.99 |
$155,805.74 |
|
202 |
$1,342.05 |
$649.19 |
$692.86 |
$155,112.87 |
|
203 |
$1,342.05 |
$646.30 |
$695.75 |
$154,417.12 |
|
204 |
$1,342.05 |
$643.40 |
$698.65 |
$153,718.47 |
|
205 |
$1,342.05 |
$640.49 |
$701.56 |
$153,016.91 |
|
206 |
$1,342.05 |
$637.57 |
$704.48 |
$152,312.43 |
|
207 |
$1,342.05 |
$634.64 |
$707.42 |
$151,605.01 |
|
208 |
$1,342.05 |
$631.69 |
$710.37 |
$150,894.65 |
|
209 |
$1,342.05 |
$628.73 |
$713.33 |
$150,181.32 |
|
210 |
$1,342.05 |
$625.76 |
$716.30 |
$149,465.02 |
|
211 |
$1,342.05 |
$622.77 |
$719.28 |
$148,745.74 |
|
212 |
$1,342.05 |
$619.77 |
$722.28 |
$148,023.46 |
|
213 |
$1,342.05 |
$616.76 |
$725.29 |
$147,298.17 |
|
214 |
$1,342.05 |
$613.74 |
$728.31 |
$146,569.86 |
|
215 |
$1,342.05 |
$610.71 |
$731.35 |
$145,838.51 |
|
216 |
$1,342.05 |
$607.66 |
$734.39 |
$145,104.12 |
|
217 |
$1,342.05 |
$604.60 |
$737.45 |
$144,366.66 |
|
218 |
$1,342.05 |
$601.53 |
$740.53 |
$143,626.14 |
|
219 |
$1,342.05 |
$598.44 |
$743.61 |
$142,882.52 |
|
220 |
$1,342.05 |
$595.34 |
$746.71 |
$142,135.81 |
|
221 |
$1,342.05 |
$592.23 |
$749.82 |
$141,385.99 |
|
222 |
$1,342.05 |
$589.11 |
$752.95 |
$140,633.05 |
|
223 |
$1,342.05 |
$585.97 |
$756.08 |
$139,876.96 |
|
224 |
$1,342.05 |
$582.82 |
$759.23 |
$139,117.73 |
|
225 |
$1,342.05 |
$579.66 |
$762.40 |
$138,355.33 |
|
226 |
$1,342.05 |
$576.48 |
$765.57 |
$137,589.76 |
|
227 |
$1,342.05 |
$573.29 |
$768.76 |
$136,821.00 |
|
228 |
$1,342.05 |
$570.09 |
$771.97 |
$136,049.03 |
|
229 |
$1,342.05 |
$566.87 |
$775.18 |
$135,273.85 |
|
230 |
$1,342.05 |
$563.64 |
$778.41 |
$134,495.43 |
|
231 |
$1,342.05 |
$560.40 |
$781.66 |
$133,713.78 |
|
232 |
$1,342.05 |
$557.14 |
$784.91 |
$132,928.86 |
|
233 |
$1,342.05 |
$553.87 |
$788.18 |
$132,140.68 |
|
234 |
$1,342.05 |
$550.59 |
$791.47 |
$131,349.21 |
|
235 |
$1,342.05 |
$547.29 |
$794.77 |
$130,554.45 |
|
236 |
$1,342.05 |
$543.98 |
$798.08 |
$129,756.37 |
|
237 |
$1,342.05 |
$540.65 |
$801.40 |
$128,954.97 |
|
238 |
$1,342.05 |
$537.31 |
$804.74 |
$128,150.23 |
|
239 |
$1,342.05 |
$533.96 |
$808.09 |
$127,342.13 |
|
240 |
$1,342.05 |
$530.59 |
$811.46 |
$126,530.67 |
|
241 |
$1,342.05 |
$527.21 |
$814.84 |
$125,715.83 |
|
242 |
$1,342.05 |
$523.82 |
$818.24 |
$124,897.59 |
|
243 |
$1,342.05 |
$520.41 |
$821.65 |
$124,075.94 |
|
244 |
$1,342.05 |
$516.98 |
$825.07 |
$123,250.87 |
|
245 |
$1,342.05 |
$513.55 |
$828.51 |
$122,422.36 |
|
246 |
$1,342.05 |
$510.09 |
$831.96 |
$121,590.40 |
|
247 |
$1,342.05 |
$506.63 |
$835.43 |
$120,754.97 |
|
248 |
$1,342.05 |
$503.15 |
$838.91 |
$119,916.06 |
|
249 |
$1,342.05 |
$499.65 |
$842.40 |
$119,073.66 |
|
250 |
$1,342.05 |
$496.14 |
$845.91 |
$118,227.75 |
|
251 |
$1,342.05 |
$492.62 |
$849.44 |
$117,378.31 |
|
252 |
$1,342.05 |
$489.08 |
$852.98 |
$116,525.33 |
|
253 |
$1,342.05 |
$485.52 |
$856.53 |
$115,668.80 |
|
254 |
$1,342.05 |
$481.95 |
$860.10 |
$114,808.70 |
|
255 |
$1,342.05 |
$478.37 |
$863.68 |
$113,945.01 |
|
256 |
$1,342.05 |
$474.77 |
$867.28 |
$113,077.73 |
|
257 |
$1,342.05 |
$471.16 |
$870.90 |
$112,206.83 |
|
258 |
$1,342.05 |
$467.53 |
$874.53 |
$111,332.31 |
|
259 |
$1,342.05 |
$463.88 |
$878.17 |
$110,454.14 |
|
260 |
$1,342.05 |
$460.23 |
$881.83 |
$109,572.31 |
|
261 |
$1,342.05 |
$456.55 |
$885.50 |
$108,686.81 |
|
262 |
$1,342.05 |
$452.86 |
$889.19 |
$107,797.61 |
|
263 |
$1,342.05 |
$449.16 |
$892.90 |
$106,904.72 |
|
264 |
$1,342.05 |
$445.44 |
$896.62 |
$106,008.10 |
|
265 |
$1,342.05 |
$441.70 |
$900.35 |
$105,107.75 |
|
266 |
$1,342.05 |
$437.95 |
$904.11 |
$104,203.64 |
|
267 |
$1,342.05 |
$434.18 |
$907.87 |
$103,295.77 |
|
268 |
$1,342.05 |
$430.40 |
$911.66 |
$102,384.11 |
|
269 |
$1,342.05 |
$426.60 |
$915.45 |
$101,468.66 |
|
270 |
$1,342.05 |
$422.79 |
$919.27 |
$100,549.39 |
|
271 |
$1,342.05 |
$418.96 |
$923.10 |
$99,626.29 |
|
272 |
$1,342.05 |
$415.11 |
$926.94 |
$98,699.35 |
|
273 |
$1,342.05 |
$411.25 |
$930.81 |
$97,768.54 |
|
274 |
$1,342.05 |
$407.37 |
$934.69 |
$96,833.86 |
|
275 |
$1,342.05 |
$403.47 |
$938.58 |
$95,895.28 |
|
276 |
$1,342.05 |
$399.56 |
$942.49 |
$94,952.79 |
|
277 |
$1,342.05 |
$395.64 |
$946.42 |
$94,006.37 |
|
278 |
$1,342.05 |
$391.69 |
$950.36 |
$93,056.01 |
|
279 |
$1,342.05 |
$387.73 |
$954.32 |
$92,101.69 |
|
280 |
$1,342.05 |
$383.76 |
$958.30 |
$91,143.39 |
|
281 |
$1,342.05 |
$379.76 |
$962.29 |
$90,181.10 |
|
282 |
$1,342.05 |
$375.75 |
$966.30 |
$89,214.80 |
|
283 |
$1,342.05 |
$371.73 |
$970.33 |
$88,244.48 |
|
284 |
$1,342.05 |
$367.69 |
$974.37 |
$87,270.11 |
|
285 |
$1,342.05 |
$363.63 |
$978.43 |
$86,291.68 |
|
286 |
$1,342.05 |
$359.55 |
$982.51 |
$85,309.17 |
|
287 |
$1,342.05 |
$355.45 |
$986.60 |
$84,322.57 |
|
288 |
$1,342.05 |
$351.34 |
$990.71 |
$83,331.86 |
|
289 |
$1,342.05 |
$347.22 |
$994.84 |
$82,337.03 |
|
290 |
$1,342.05 |
$343.07 |
$998.98 |
$81,338.04 |
|
291 |
$1,342.05 |
$338.91 |
$1,003.15 |
$80,334.90 |
|
292 |
$1,342.05 |
$334.73 |
$1,007.33 |
$79,327.57 |
|
293 |
$1,342.05 |
$330.53 |
$1,011.52 |
$78,316.05 |
|
294 |
$1,342.05 |
$326.32 |
$1,015.74 |
$77,300.31 |
|
295 |
$1,342.05 |
$322.08 |
$1,019.97 |
$76,280.34 |
|
296 |
$1,342.05 |
$317.83 |
$1,024.22 |
$75,256.12 |
|
297 |
$1,342.05 |
$313.57 |
$1,028.49 |
$74,227.64 |
|
298 |
$1,342.05 |
$309.28 |
$1,032.77 |
$73,194.86 |
|
299 |
$1,342.05 |
$304.98 |
$1,037.08 |
$72,157.79 |
|
300 |
$1,342.05 |
$300.66 |
$1,041.40 |
$71,116.39 |
|
301 |
$1,342.05 |
$296.32 |
$1,045.74 |
$70,070.66 |
|
302 |
$1,342.05 |
$291.96 |
$1,050.09 |
$69,020.56 |
|
303 |
$1,342.05 |
$287.59 |
$1,054.47 |
$67,966.10 |
|
304 |
$1,342.05 |
$283.19 |
$1,058.86 |
$66,907.23 |
|
305 |
$1,342.05 |
$278.78 |
$1,063.27 |
$65,843.96 |
|
306 |
$1,342.05 |
$274.35 |
$1,067.70 |
$64,776.26 |
|
307 |
$1,342.05 |
$269.90 |
$1,072.15 |
$63,704.10 |
|
308 |
$1,342.05 |
$265.43 |
$1,076.62 |
$62,627.48 |
|
309 |
$1,342.05 |
$260.95 |
$1,081.11 |
$61,546.38 |
|
310 |
$1,342.05 |
$256.44 |
$1,085.61 |
$60,460.76 |
|
311 |
$1,342.05 |
$251.92 |
$1,090.13 |
$59,370.63 |
|
312 |
$1,342.05 |
$247.38 |
$1,094.68 |
$58,275.95 |
|
313 |
$1,342.05 |
$242.82 |
$1,099.24 |
$57,176.72 |
|
314 |
$1,342.05 |
$238.24 |
$1,103.82 |
$56,072.90 |
|
315 |
$1,342.05 |
$233.64 |
$1,108.42 |
$54,964.48 |
|
316 |
$1,342.05 |
$229.02 |
$1,113.04 |
$53,851.45 |
|
317 |
$1,342.05 |
$224.38 |
$1,117.67 |
$52,733.77 |
|
318 |
$1,342.05 |
$219.72 |
$1,122.33 |
$51,611.44 |
|
319 |
$1,342.05 |
$215.05 |
$1,127.01 |
$50,484.44 |
|
320 |
$1,342.05 |
$210.35 |
$1,131.70 |
$49,352.73 |
|
321 |
$1,342.05 |
$205.64 |
$1,136.42 |
$48,216.32 |
|
322 |
$1,342.05 |
$200.90 |
$1,141.15 |
$47,075.16 |
|
323 |
$1,342.05 |
$196.15 |
$1,145.91 |
$45,929.26 |
|
324 |
$1,342.05 |
$191.37 |
$1,150.68 |
$44,778.57 |
|
325 |
$1,342.05 |
$186.58 |
$1,155.48 |
$43,623.10 |
|
326 |
$1,342.05 |
$181.76 |
$1,160.29 |
$42,462.81 |
|
327 |
$1,342.05 |
$176.93 |
$1,165.13 |
$41,297.68 |
|
328 |
$1,342.05 |
$172.07 |
$1,169.98 |
$40,127.70 |
|
329 |
$1,342.05 |
$167.20 |
$1,174.86 |
$38,952.85 |
|
330 |
$1,342.05 |
$162.30 |
$1,179.75 |
$37,773.10 |
|
331 |
$1,342.05 |
$157.39 |
$1,184.67 |
$36,588.43 |
|
332 |
$1,342.05 |
$152.45 |
$1,189.60 |
$35,398.83 |
|
333 |
$1,342.05 |
$147.50 |
$1,194.56 |
$34,204.27 |
|
334 |
$1,342.05 |
$142.52 |
$1,199.54 |
$33,004.73 |
|
335 |
$1,342.05 |
$137.52 |
$1,204.53 |
$31,800.20 |
|
336 |
$1,342.05 |
$132.50 |
$1,209.55 |
$30,590.64 |
|
337 |
$1,342.05 |
$127.46 |
$1,214.59 |
$29,376.05 |
|
338 |
$1,342.05 |
$122.40 |
$1,219.65 |
$28,156.40 |
|
339 |
$1,342.05 |
$117.32 |
$1,224.74 |
$26,931.66 |
|
340 |
$1,342.05 |
$112.22 |
$1,229.84 |
$25,701.82 |
|
341 |
$1,342.05 |
$107.09 |
$1,234.96 |
$24,466.86 |
|
342 |
$1,342.05 |
$101.95 |
$1,240.11 |
$23,226.75 |
|
343 |
$1,342.05 |
$96.78 |
$1,245.28 |
$21,981.47 |
|
344 |
$1,342.05 |
$91.59 |
$1,250.46 |
$20,731.01 |
|
345 |
$1,342.05 |
$86.38 |
$1,255.67 |
$19,475.34 |
|
346 |
$1,342.05 |
$81.15 |
$1,260.91 |
$18,214.43 |
|
347 |
$1,342.05 |
$75.89 |
$1,266.16 |
$16,948.27 |
|
348 |
$1,342.05 |
$70.62 |
$1,271.44 |
$15,676.83 |
|
349 |
$1,342.05 |
$65.32 |
$1,276.73 |
$14,400.10 |
|
350 |
$1,342.05 |
$60.00 |
$1,282.05 |
$13,118.04 |
|
351 |
$1,342.05 |
$54.66 |
$1,287.40 |
$11,830.65 |
|
352 |
$1,342.05 |
$49.29 |
$1,292.76 |
$10,537.89 |
|
353 |
$1,342.05 |
$43.91 |
$1,298.15 |
$9,239.74 |
|
354 |
$1,342.05 |
$38.50 |
$1,303.56 |
$7,936.19 |
|
355 |
$1,342.05 |
$33.07 |
$1,308.99 |
$6,627.20 |
|
356 |
$1,342.05 |
$27.61 |
$1,314.44 |
$5,312.76 |
|
357 |
$1,342.05 |
$22.14 |
$1,319.92 |
$3,992.84 |
|
358 |
$1,342.05 |
$16.64 |
$1,325.42 |
$2,667.43 |
|
359 |
$1,342.05 |
$11.11 |
$1,330.94 |
$1,336.49 |
|
360 |
$1,342.05 |
$5.57 |
$1,336.49 |
($0.00) |
Question 3: Monthly Payments at Various Years of Maturity and Interest Rates
|
Summary Table |
|||
| Loan Initial Balance |
$250,000 |
||
| Number of payments per year |
12 |
||
| Maturity Years/ Interest Rate |
4% |
5% |
6% |
|
15 |
$1,849.22 |
$1,976.98 |
$2,109.64 |
|
20 |
$1,514.95 |
$1,649.89 |
$1,791.08 |
|
30 |
$1,193.54 |
$1,342.05 |
$1,498.88 |
The monthly payments increase as the interest rates increase. However, the monthly payments decrease with an increase in the years of maturity. From these calculations, it is evident that individuals with lower incomes should go for mortgage loans with long maturity to reduce the monthly payments they should make towards repaying the loan. With the interest rates remaining constant, loans with long maturity periods have the disadvantage of that the loanee ends up paying higher total interest than when the maturity period is shorter (Balling et al., 2013).
Question 4: Amount at the End of the 30 th Year
| Amount invested per month |
$500 |
| Number of years to retirement |
30 |
| Number of investments per year |
12 |
| Expected return per annum |
8% |
| Amount at the end of the 30th year |
$745,179.72 |
The future value of the monthly contributions is calculated using the Excel “FV” function. The calculation is made based on the future value of an ordinary annuity (Brigham & Houston, 2018) . The current balance of the retirement savings (present value) is treated as $0.
Question 5: Amounts at the End of the 30th Year when Investing at various Monthly Amounts and Rates of Return
|
Summary Table |
|||
| Number of years to retire |
30 |
||
| Number of Investments per year |
12 |
||
| Rate/Amount |
$100 |
$500 |
$750 |
|
6% |
$100,451.50 |
$502,257.52 |
$753,386.28 |
|
7% |
$121,997.10 |
$609,985.50 |
$914,978.25 |
|
8% |
$149,035.94 |
$745,179.72 |
$1,117,769.59 |
|
10% |
$226,048.79 |
$1,130,243.96 |
$1,695,365.94 |
|
12% |
$349,496.41 |
$1,747,482.07 |
$2,621,223.10 |
The amount available at the end of the 30 th year increases with increased monthly investments and interest rates. From these calculations, it is evident that employees seeking to have high amounts in their accounts during their retirement should choose financial organizations offering high return rates and ensure that they deposit large monthly deposits.
References
Balling, M., Bentzen, C. S., Berg, J., Boyce, A., Callesen, P., Carrasco-Gallego, J., ... & Lansing, K. J. (2013). Property prices and real estate financing in a turbulent world. Vienna: SUERF-The European Money and Finance Forum.
Brickner, D., & Mahoney, L. (2018). Factoring in the time value of money with Excel. Journal Of Accountancy , 225 (3), 42-54. Retrieved 25 December 2020, from https://eds-a-ebscohost-com.proxy1.ncu.edu/eds/pdfviewer/pdfviewer?vid=1&sid=2954f5df-e0b2-4e4e-957e-76a41f40a2c8%40sessionmgr4008.
Brigham, E., & Houston, J. (2018). Fundamentals of financial management (15th ed., pp. 148-182). Cengage Learning.
United States (USA) National Minimum Wage - NMW 2020 . countryeconomy.com. (2020). Retrieved 25 December 2020, from https://countryeconomy.com/national-minimum-wage/usa.
US Department of Labor. Questions and answers about the minimum wage . Retrieved 25 December 2020, from https://www.dol.gov/agencies/whd/minimum-wage/faq.
