RatedrillBalloon payment
A time value of money problem from Ratedrill. Solve it with one answer box, with fresh numbers on every attempt and the formula, calculator keystrokes and Excel version in the worked answer, and it is checked the moment you submit.
The task
A $220,000 commercial real estate loan at 5.25% APR has monthly payments of $1,318.34, based on a 25-year amortization. The loan matures after 10 years. What balloon payment is due at maturity, on top of the last regular payment?
What this problem teaches
The formula: Balloon = L × (1 + i)^n - PMT × ((1 + i)^n - 1) / i. Set P/Y = C/Y = 1, so I/Y is the rate per period. Cash you pay out is negative and cash you receive is positive.
A hint if you get stuck
The balloon is the balance still owed right after the last regular payment at maturity.
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