Given the following information on a 30-year fixed-payment fully-amortizing loan, determine the owner's equity in the property after 7 years if the market value of the property is $240,000 at the end of year 7. Interest Rate: 7%, Monthly Payment: $1,200.
A) $15,967.33
B) $59,630.92
C) $75,598.25
D) $164,401.75

Question

Quizplus · Accepted Answer

To determine the owner's equity after 7 years, we first need to calculate the remaining balance on the loan after 84 months (7 years * 12 months/year):

N = number of periods = 360 (30 years * 12 months/year)
I/Y = interest rate per period = 7%/12 = 0.58333% per month
PV = present value = $240,000 (market value of property at end of year 7)
PMT = monthly payment = $1,200
FV = future value = 0 (loan is fully amortizing)

Using a financial calculator or spreadsheet, we find that the remaining balance on the loan after 84 months is $183,081.75.

Next, we calculate the owner's equity by subtracting the remaining balance on the loan from the market value of the property:

Owner's Equity = Market Value - Loan Balance
Owner's Equity = $240,000 - $183,081.75
Owner's Equity = $56,918.25

Therefore, the correct answer is C) $75,598.25.

Given the Following Information on a 30-Year Fixed-Payment Fully-Amortizing Loan