SCENARIO 2 Discounting a Partially Amortized Loan
Assume that the Kwon mortgage was based on a 5-year term, with the investor’s yield expectation
remaining the same. The cost of sale would be reduced significantly given a balloon payment
at end-of-year five (EOY 5).
STEP 1 Calculate Monthly Mortgage Payment
C ALL 6 NOM% 2 P/YR EFF% 12 P/YR NOM% 300
N 180000
PV
PMT
The monthly payment is $1,151.65.
STEP 2 Calculate Balance Outstanding (Balloon Payment) at EOY 5
60 INPUT AMORT
The outstanding balance at the end of year five is $161,706.07. Store this amount as the
future value of the mortgage by

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