Multiple choice with one correct answer: Consider this python code:

# Given values

P$0\_$loan $=100000$ # Loan amount

r$\_$loan $=7/100/12$ # Monthly interest rate

n$\_$loan $=30*12$ # Total number of payments $(30$ years$)$

fv$\_$loan $=1\mathrm{.}25*$ P$0\_$loan # Balloon payment

npf$.$pmt$($rate$=$r$\_$loan, nper$=$n$\_$loan, pv$=-$P$0\_$loan, fv$=$fv$\_$loan$)$

Which statement BEST describes this code?

Multiple choice with one correct answer: Consider this python code:

# Given values

P$0\_$loan $=100000$ # Loan amount

r$\_$loan $=7/100/12$ # Monthly interest rate

n$\_$loan $=30*12$ # Total number of payments $(30$ years$)$

fv$\_$loan $=1\mathrm{.}25*$ P$0\_$loan # Balloon payment

npf$.$pmt$($rate$=$r$\_$loan, nper$=$n$\_$loan, pv$=-$P$0\_$loan, fv$=$fv$\_$loan$)$

Which statement BEST describes this code?

a$.$ This code calculates the monthly payment for a partially amortizing $30-$year mortgage loan of $$100,000$ with a $7\%$ annual interest rate. The loan has a balloon payment at maturity that is $125\%$ of the original loan balance, which is accounted for by setting the future value $($fv$\_$loan$)$ to $1\mathrm{.}25$ times the loan amount. The npf$.$pmt function is used to compute the monthly payment required to maintain this loan structure over the $30-$year term.

b$.$ This code calculates the monthly payment for a fully amortizing $30-$year mortgage loan of $$100,000$ with a $7\%$ annual interest rate. The loan has a balloon payment at maturity that is $125\%$ of the original loan balance, which is accounted for by setting the future value $($fv$\_$loan$)$ to $1\mathrm{.}25$ times the loan amount. The npf$.$pmt function is used to compute the monthly payment required to maintain this loan structure over the $30-$year term.

c$.$ This code calculates the monthly payment for a negative amortization, $30-$year mortgage loan of $$100,000$ with a $7\%$ annual interest rate. The loan has a balloon payment at maturity that is $125\%$ of the original loan balance, which is accounted for by setting the future value $($fv$\_$loan$)$ to $1\mathrm{.}25$ times the loan amount. The npf$.$pmt function is used to compute the monthly payment required to maintain this loan structure over the $30-$year term.

d$.$ This code determines the monthly payment required to partially amortize a $$100,000$ loan over $30$ years at a $7\%$ interest rate with no balloon payment. The variable fv$\_$loan is mistakenly set to a larger value, which would overestimate the payment. The npf$.$pmt function calculates the monthly payment based on the full amortization of the loan, not considering any balloon payment.

e$.$ This code calculates the monthly payment for an interest$-$only $30-$year mortgage loan of $$100,000$ with a $7\%$ annual interest rate. The loan has a balloon payment at maturity that is $125\%$ of the original loan balance, which is accounted for by setting the future value $($fv$\_$loan$)$ to $1\mathrm{.}25$ times the loan amount. The npf$.$pmt function is used to compute the monthly payment required to maintain this loan structure over the $30-$year term.