Suppose that you bought a house worth $400,000 by putting a down payment of $50.000 and by taking...

Question

Question

business finance

Answer 1

Answer #1

a Loan = price-down = 400000-50000=350000

PVordinary Annuity

PV_{Ordinary Annuity} = C*[(1-(1+i/100)^(-n))/(i/100)]

C = Cash flow per period

i = interest rate

n = number of payments

350000= Cash Flow*((1-(1+ 4.2/1200)^(-30*12))/(4.2/1200))

Cash Flow = 1711.56 = monthly payment

b

PV_{Ordinary Annuity} = C*[(1-(1+i/100)^(-n))/(i/100)]

C = Cash flow per period

i = interest rate

n = number of payments

PV= 1711.56*((1-(1+ 4.2/1200)^(-20*12))/(4.2/1200))

PV = 277593.45

c

Equity = market value-amount owed = 460000-277593.45=182406.55

Answer 2

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