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About LinkBackshaving trouble solving the following problem..there is no interest rate given?? anyone know a formula/answer
whats the monthly mortgage constant on a 20yr mortgage loan of $75000 requiring payments of $500 per month?
having trouble solving the following problem..there is no interest rate given?? anyone know a formula/answer
whats the monthly mortgage constant on a 20yr mortgage loan of $75000 requiring payments of $500 per month?
the formula for mortgage constant
_____r_____
1-[1/(1=r)n ]
on my financial calculator i entered pv=75000 n=20 pmt(-500) to find the interest 14.45% then entered p/y= 12 pv=-1 n=240 IY=14.45 and got .01 as the constant...not right..thanks for any help im really stuck
this might help and thanks so much for your time
r=the annual interest rate
n=number of years
• You borrow $100,000 to buy a parcel of real estate. The annual interest rate is 10% and the loan is to be repaid with annual payments (including principal and interest) over the next 10 years. How much will your payments be?
Keystrokes Display Comments
CE/C CE/C 0.00 Clears display
2nd CLR TVM 0.00 Clears TVM variables
100000 +/- PV PV = -100,000.00 Stores original loan amount
10 N N = 10.00 Stores number of periods
10 I/Y I/Y = 10.00 Stores the interest rate
CPT PMT PMT = -16,274.54 Annual payment
Solving for Monthly and Annual Loan Constants
• You are offered a 10-year, monthly payment loan at 10% annual interest. Calculate the monthly loan constant (i.e., the monthly payment per $1 of loan amount) and the annual loan constant (the annual payment per $1 of loan amount).
Keystrokes Display Comments
2nd P/Y PY = 1.00
12 ENTER PY = 12.00 Sets number of payments per year at 12
CE/C CE/C 0.00 Clears display
2nd CLR TVM 0.00 Clears TVM variables
1 +/- PV PV = -1.00 Stores original loan amount
10 x 12 = 120 N N = 120.00 Stores number of periods
10 I/Y I/Y = 10.00 Stores the interest rate
CPT PMT PMT = .0132151 Monthly loan constant
x 12 = .1585809 Annual loan constant
• Monthly payment: $100,000 x .0132151 = $1,321.51
• Annual payment: $100,000 x .1585809 = $15,858.09
The mortgage constant represents the amount of each periodic loan payment expressed as a percentage of the original loan, necessary to pay the contract rate of interest and the entire principal in equal periodic installments over the term of the loan. The mortgage constant is sometimes called the installment to amortize since it is the periodic payment necessary to repay a loan of $1 completely without resorting to a balloon payment. Thus, the mortgage constant is always the periodic payment for a loan of $1 expressed on an annual basis.
So wouldn't this mean that you take the payments of $500 per month and divide by the total loan amount $75000?
500/75000 = .006666...
NO, because I am not accounting for it being on an annual basis
maybe try (500*12)/75000 = .08
Is this correct?
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Originally Posted by davidaross 
