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Understanding Present Value and Loan Withdrawals: Monthly Payment Calculations

This document explores the concept of Present Value (PV) and how to manage loan withdrawals effectively. We discuss techniques such as the “sum of a series” for calculating PV and how it applies to loan management including the computation of payments (PMT) for various loan amounts. An example illustrates financing a $90,000 home through a 30-year loan at 6.6% interest compounded monthly, detailing how to compute the size of monthly payments and the total amount paid over the loan's duration. Understanding these concepts is crucial for effective financial planning.

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Understanding Present Value and Loan Withdrawals: Monthly Payment Calculations

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  1. Present Valueand Loans Mat 112

  2. Now, let’s withdraw

  3. Withdraw from a “present value”

  4. Paying off a Loan

  5. How long does the money last?

  6. Quarterly Withdrawals

  7. Present Value

  8. We use the same “sum of a series” technique, as we used for FV, and arrive at: Another sum of exponentials

  9. 2 Versions of the PV formula

  10. Examples for Present Value Mat 112

  11. Compute PV

  12. How much interest?

  13. Compute PMT

  14. Setup, and compute... PMT = $ 846.09

  15. Car Payments

  16. Purchase Price?

  17. A Bigger Loan If you plan to buy a house and finance $90,000 with a 30-year loan charging 6.6% compounded monthly, what is the size of your monthly payment? Here n = 12(30) = 360 payments. Over the 30 years, what is the total of your monthly payments?

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