Question

Hi ! I am solving this problem right now, but I am not sure if b) and c) are correct.

I would appreciate some help!

Thank you very much.

You need a fixed-rate mortgage to buy a new home. Your mortgage bank will lend you the money with parameters of the loan shown below. a. What are your regular (periodic) payments? b. You can afford only a limited regular payment (see below), and you offer to pay off the remaining balance at the end of the loan in the form of a single balloon payment. What is this balloon payment? c. You are not happy with results in b. (why?) and decide that your regular payment should at least be enough to cover the interest. What is the regular payment in this case? How much will you have to pay in the form of balloon payment at the end? Amount borrowed APR Payment/compounding frequen Loan maturity $800,000 3.60% 12 per year 360 periods Maximu a. What are your regular payments? Score Rate 0.30% Regular Payments ($3,637.16) Maximu Score b. You can afford only a limited regular payment, and you offer to pay off the remaining balance at the end of the loan in the form of a single balloon payment. What is this balloon payment? single balloon payment. What is this balloon payment? Affordable Payment ($2,000) Balloon payment ($1,058,656.34) Maximu Score m c. You are not happy with results in b. (why?) and decide that your regular payment should at least be enough to cover the regular interest. What is the regular payment in this case? How much will you have to pay in the form of balloon payment at the end? Regular Payments Balloon payment ($2,400.00) ($800,000.00) You are unhappy with results in b. because ...

Answer 1

a
=PMT(3.6%/12,360,-800000)=3637.1628018013

b
=FV(3.6%/12,360,2000,-800000)=1058656.33814245

c
Regular payments=800000*3.6%/12=2400.00
Balloon payment=800000

You are unhappy because balloon payment is more than amount borrowed