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You want to buy a $202,000 home. You plan to pay 20% as a down payment,...

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Finance

You want to buy a $202,000 home. You plan to pay 20% as a downpayment, 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 is5%?

$

c) What will your monthly payments be if the interest rate is6%?

$

Answer & Explanation Solved by verified expert
4.5 Ratings (688 Votes)

a. Loan amount = Cost of house - Down Payment
= $       2,02,000 - (202000*20%)
= $       2,02,000 - $       40,400
= $       1,61,600
b. Monthly Payment = Loan amount / Present value of annuity of 1
= $       1,61,600 / 186.273134
= $           867.54
Working;
Present value of annuity of 1 = (1-(1+i)^-n)/i Where,
= (1-(1+0.004167)^-360)/0.004167 i = 5%/12 = 0.004167
= 186.2731343 n = 30*12 = 360
c. Monthly Payment = Loan amount / Present value of annuity of 1
= $       1,61,600 / 166.791614
= $           968.87
Working;
Present value of annuity of 1 = (1-(1+i)^-n)/i Where,
= (1-(1+0.005)^-360)/0.005 i = 6%/12 = 0.005
= 166.7916144 n = 30*12 = 360

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Transcribed Image Text

You want to buy a $202,000 home. You plan to pay 20% as a downpayment, and take out a 30 year loan for the rest.a) How much is the loan amount going to be?$b) What will your monthly payments be if the interest rate is5%?$c) What will your monthly payments be if the interest rate is6%?$

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