Jim Franklin recently purchased a home for $300,000 on which he made a downpayment of $100,000. He obtained a 30-year mortgage to finance the balance on which he pays a fixed annual interest rate of 6%. If he makes regular, fixed monthly payments, what loan balance will remain just after the 48th payment? A. $94,615 B. $186,109 C. $189,229 D. $192,444 Any clues on how to go about it. The answer C.
Yeah, you have to use the Amort fuction on the BA II Plus
Without a calculator, it is a little difficult, but since we are using calculators for the exam, then on the HP 12c: enter 48 f+AMORT followed by x>y button. That’s the amount applied to interest after making 48 payments.
you can do without AMORT function. pv=-200000 i/y=0.5% n=360 fv=0 cpt pmt= 1199.1 now just calculate PV of the payments after 48 months, i/y=0.5% n=312 fv= pmt=1199.1 cpt pv = 189,229
Cool, thunderanalyst!
but why n=312 and not n=48?
Because after 48 periods, there are 312 remaining. At that point you are asked how much do you still have to pay, not how much you paid already.
of course map- i am tired and should sleep. it is late in good old germany (11.50 pm) and will go to bed and leave this board for today really, really tired.
Thanks everyone, It makes sense now…
I did it with 48 days and FV pv -200,000.00 I .5 N 48 pymt 1,199.1 cpt FV
Thunderanalyst and others, My BA II plus pro is giving 598 when I calculate PMT. Kindly check if everyone else is getting it right! Also, how to use Amort function in this problem??
Anupam - I don’t have BA II plus, but try using clear function before doing calculations. Might work 
BAII Plus professional guide: http://education.ti.com/downloads/guidebooks/financial/baiipluspro/BAIIPLUSPROGuidebook_EN.pdf
dreary how do we enter the figures in the amortisation schedule? my calculator is BA II plus when i click 2nd Amort the first thing that comes is is P1 now how do i proceed?
Shabadoo1 Wrote: ------------------------------------------------------- > I did it with 48 days and FV > > pv -200,000.00 > I .5 > N 48 > pymt 1,199.1 > > cpt FV I did the same.
AudreyMwala, I’m using the HP 12c.
BA II Plus calculation: N: 360 I: .5 PV: 200,000 ?PMT: -1,199.1 Next Step-- 2nd AMORT for P1 type in 48 ENTER, P2 type in 48 ENTER. Down arrow to BAL it shows you 189,229.
Rather than going with monthly payments, can this be solved by just sticking with the annual payments as below?;
i) Compute annual payment
N = 30, I/Y = 6%, PV = -200k, FV = 0; CPT -> PMT = 14,529.78
ii) Solve for remaining years after 48 months (4 years)
N = 26, I/Y = 6%, FV = 0, PMT = 14,529.78, CPT -> PV = -188,933.18
The answer is close to the right answer but not exact. Is this a reasonable approach? Or would this method be wrong?
^ It’s an approximation, not the exact answer. If were on the exam committee and wanted to be a sneaky so-and-so, I would put 188,933 as one of the answer choices.
I know some of you don’t like to change the P/Y and C/Y from 1, but it saves you from having to do a manual side calc to get to the answer. For the above question, if you set P/Y=C/Y=12, you only have to enter 6 for I - and you will indeed get the correct answer!!!