Question

You want to buy a $230,000 home. You plan to pay 20% as a down payment, and take out a 30 year loan for the rest.

a) How much is the loan amount going to be?

$

b) What will your monthly payments be if the interest rate is 6%?

$

c) What will your monthly payments be if the interest rate is 7%?

$

Answer 1

a.Loan amount= Price of the house – Down payment

Down payment= 0.20%*$230,000

= $46,000.

Loan amount= $230,000 - $46,000

   = $184,000.

b.The monthly payment is calculated by entering the below in a financial calculator:

PV= -184,000

N= 30 year*12= 360 months

I/Y= 6%/12= 0.50%

Press the CPT key and PMT to compute the monthly payment.

The value obtained is 1,103.1730.

Therefore, the monthly payment is $1,103.17.

c. The monthly payment is calculated by entering the below in a financial calculator:

PV= -184,000

N= 30 year*12= 360 months

I/Y= 7%/12= 0.5833%

Press the CPT key and PMT to compute the monthly payment.

The value obtained is 1,224.1566.

Therefore, the monthly payment is $1,224.16.

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