Mortgage Payment

[saurabharora93]

Hi,

I came across the below practice question:

After five years (60 months), which is nearest to the outstanding scheduled principal balance on a 30-year fixed rate mortgage (FRM) with an original balance of $140,000 and a mortgage interest rate of 3.60%?

a. $152,300
b. $165,800
c. $179,700
d. $182,500

All the 4 answer options have values greater than the Original balance. Is it possible or am I missing something here ?

Thanks.

 

[Nicole Seaman]

Note: The original thread for this practice question is located here in the forum: https://forum.bionicturtle.com/thre...al-mortgage-products-tuckman.8474/#post-35390.

 

[saurabharora93]

Hi Nicole,

I don't have the permission to access the above link. That's why, asked the question here : )

 

[ShaktiRathore]

Monthly payment=(140,000*(.036/12))/(1-(1+.036/12)^(-360))=636.50
O/s balance=(636.50/(.036/12))*(1-(1+.036/12)^(-300))=125,790 which matches none.
yeah there is some error in the question.
thanks

 

[Nicole Seaman]

Hi Nicole,

I don't have the permission to access the above link. That's why, asked the question here : )

Hello @saurabharora93

Yes, sorry. The link I provided is the original practice question, and includes all of the answers and explanations, but it is in the paid section of the forum.

Thank you,

Nicole

 

[David Harper CFA FRM]

Thank you for pointing to the source question here @Nicole Manley . It was originally incorrect but we fixed it and Nicole uploaded the fix in April 2015. Praytell, how did you get your copy @saurabharora93 , I wonder?