Question

Olivia plans to secure a 5-year balloon mortgage of $290,000 toward the purchase of a condominium. Her monthly payment for the 5 years is calculated on the basis of a 30-year conventional mortgage at the rate of 3%/year compounded monthly. At the end of the 5 years, Olivia is required to pay the balance owed (the "balloon" payment). What will be her monthly payment for the first 5 years, and what will be her balloon payment? (Round your answers to the nearest cent.)

monthly payment $ balloon payment $

Answer 1

Calculating Monthly Payment,

using TVM calculation,

PMT = [PV = 290,000, N = 360, FV = 0, I = 0.03/12]

PMT = $1,222.65

Monthly Payment = $1,222.65

Calculating Balloon Payment,

Using TVM Calculation,

FV = [PV = 290,000, PMT = -1,222.65, N = 60, I = 0.03/12]

FV = $257,828.56

Balloon Payment = $257,828.56