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**CFA Practice Question**

You take a mortgage loan for $10,000 for 20 years (monthly repayments). The rate of interest is 0.6% per month. If you want to prepay the loan at the end of the 40th month, what is principal left to be repaid? (The monthly payment for the 40th month is not included in the answer.)

A. 8,122

B. 8,835

C. 9,156

**Explanation:**First calculate the monthly repayment. There are 240 monthly payments to be made, and you have made 40 of those. There remain 200 monthly repayments to be made. The remaining principle is the present value of an annuity with the monthly payments (previously calculated) for 200 months.

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**User Contributed Comments**
2

User |
Comment |
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Clude |
N=240 r-0.6 pv=10000, cpt PMT=78.73. Then, PMT=78.73, r=0.6, N=200, CPT PV=9156 |

chcarnes |
Thank you clude! |