University of Central Florida (UCF) REE3043 Fundamentals of Real Estate Practice Exam 4

To determine the current balance of a level payment loan, we can use the concept of the present value of an annuity. This type of calculation involves the amount of the fixed payment, the interest rate, and the remaining number of payments.

In this scenario, the loan has a fixed payment of $1,000, an interest rate of 9%, and 12 remaining payments. The present value of an annuity formula can be used to evaluate the remaining balance:

Present Value (PV) = Pmt x [(1 - (1 + r)^-n) / r]

Where:

- Pmt is the payment amount ($1,000)

- r is the period interest rate (annual rate divided by the number of payments per year)

- n is the total number of remaining payments (12)

For an annual interest rate of 9%, the period interest rate for monthly payments would be 0.09/12, which equals 0.0075. Since payments are made monthly, the total number of periods (n) is 12.

Now calculating the present value:

PV = $1,000 x [(1 - (1 + 0.0075)^-12) / 0.0075]

After performing