Example (contd): Calculating outstanding term and final repayment

$150,046.98 balance; repayments X = 1, 464.97 per month. Interest rate

is 8.4% per annum convertible monthly. Contract is now 10 years old.
How long will it take for the loan to be discharged (M periods)? What
will be the final repayment (XM )?
Detailed explanation:
Fundamental equation is L120 = XaM 1 + XM v M ()
We look for M such that 0 < XM X .
We find two inequalities for aM .
First inequality
From (), aM 1 =
Since aM

L120

XM v M
X

<

L120
X

= y

= v(1 + aM 1 ), this gives us:

aM

< v(1 + y).

(Ineq. 1)
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Second inequality
implies

L120 XaM

L120

aM

= y.

(Ineq. 2).

Hence, we look for an integer M that satisfies

y aM

< v(1 + y),

y =

L120
X

(Fundamental ineqs)

If we have an equality

aM

then

= x

vM

= ix

then

M =

log(1

ix).

Hence, the two inequalities yield

log(1

iy) M <

log(1

iv(1 + y)).

In the example the lower and upper bounds are (respectively) 180.941
and 181.941, so M = 181, that is, 15 years and one month. Since the
loan is already 10 years old, in total the it will have been paid in 25 years
and 1 month.
141