Forty-eight (48) months ago, James Alfred Charles purchased a$2,750,000 house in Buckhead with no money down (i.e. he borrowed$2,750,000). The interest rate on his 30-year, monthly payment loanwas 6.25 percent. For the first 48 months of the loan, James paidtwice the normal required payment (for example, if the requiredpayment to pay off the loan in 30 years was $4000 per month, Jamesactually paid $8000 per month, with all excess being appliedagainst the principle balance).
Now, James is thinking about downsizing and he would like toknow how much equity he has accumulated in his home. Unfortunately,the market value of his home has depreciated by 30 percent over thepast 4 years (thus, James can only sell his house today for$1,925,000).
Assuming that James made all of his monthly payments (i.e.,twice the required amount) on time and assuming that he can sellhis house today (i.e., immediately after making his 48th monthlypayment) for $1,925,000, how much equity can James Alfred Charlesexpect to take out of his home? (Note: for this problem, to achieveas precise an answer as possible, round all intermediatecalculations – payment, interest rate, N, etc. to a minimum of 4decimal places).
