Posted by David Alexander on March 25, 2000 at 01:57:07:
The First 120 payments is worth $10953.40
N 120 I 10% PMT 144.75 PV 10953.40
N 120 I 22% PMT 144.75 PV 10953.40
Your yield if you receive the payments without and early payoff is 22%
To calculate the payout (PV) of the back payments if you were to be paid off immediately, first calculate the PV of the payment stream. We already know that which is the $10953.40 but you have to discount it to the present. The easy way is subtract $10953.40 from the 15k, but I’m going to give you the fundemental formula for doing it also so you can discount backend tails.
PMT 0 I 10% N 120 FV 10953.40
Calculate for PV Should get 4046.60
(for some reason Notesmith is throwing out $4046.26, and my trusty TI isn’t handy) Anyway, it’s late and that’s the fundamental way to figure the PV.