(Annuity payments) Mr. Bill S.? Preston, Esq., purchased a new house for ?$100,000. He paid ?$15,000...

Free

60.1K

Verified Solution

Question

Finance

(Annuity payments) Mr. Bill S.? Preston, Esq., purchased a newhouse for ?$100,000. He paid ?$15,000 upfront and agreed to pay therest over the next 25 years in 25 equal annual payments thatinclude principal payments plus 8 percent compound interest on theunpaid balance.
What will these equal payments? be?
Mr. Bill S.? Preston, Esq., purchased a new house for ?$100,000and paid $15,000 upfront. How much does he need to borrow topurchase the? house?

Answer & Explanation Solved by verified expert

4.5 Ratings (654 Votes)

Amount borrowed = price of house-upfront payment = 100000-15000=85000

	Annual rate(M)=	yearly rate/12=	8.00%	Annual payment=	7962.70
Year	Beginning balance (A)	Annual payment	Interest = M*A	Principal paid	Ending balance
1	85000.00	7962.70	6800.00	1162.70	83837.30
2	83837.30	7962.70	6706.98	1255.71	82581.59
3	82581.59	7962.70	6606.53	1356.17	81225.42
4	81225.42	7962.70	6498.03	1464.66	79760.76
5	79760.76	7962.70	6380.86	1581.84	78178.93
6	78178.93	7962.70	6254.31	1708.38	76470.54
7	76470.54	7962.70	6117.64	1845.05	74625.49
8	74625.49	7962.70	5970.04	1992.66	72632.83
9	72632.83	7962.70	5810.63	2152.07	70480.76
10	70480.76	7962.70	5638.46	2324.24	68156.53
11	68156.53	7962.70	5452.52	2510.17	65646.35
12	65646.35	7962.70	5251.71	2710.99	62935.37
13	62935.37	7962.70	5034.83	2927.87	60007.50
14	60007.50	7962.70	4800.60	3162.10	56845.40
15	56845.40	7962.70	4547.63	3415.06	53430.34
16	53430.34	7962.70	4274.43	3688.27	49742.07
17	49742.07	7962.70	3979.37	3983.33	45758.74
18	45758.74	7962.70	3660.70	4302.00	41456.74
19	41456.74	7962.70	3316.54	4646.16	36810.59
20	36810.59	7962.70	2944.85	5017.85	31792.74
21	31792.74	7962.70	2543.42	5419.28	26373.46
22	26373.46	7962.70	2109.88	5852.82	20520.64
23	20520.64	7962.70	1641.65	6321.04	14199.60
24	14199.60	7962.70	1135.97	6826.73	7372.87
25	7372.87	7962.70	589.83	7372.87	0.00

Where

Interest paid = Beginning balance * Annual interest rate

Principal = Annual payment – interest paid

Ending balance = beginning balance – principal paid

Beginning balance = previous Year ending balance

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

(Annuity payments) Mr. Bill S.? Preston, Esq., purchased a newhouse for ?$100,000. He paid ?$15,000 upfront and agreed to pay therest over the next 25 years in 25 equal annual payments thatinclude principal payments plus 8 percent compound interest on theunpaid balance.What will these equal payments? be?Mr. Bill S.? Preston, Esq., purchased a new house for ?$100,000and paid $15,000 upfront. How much does he need to borrow topurchase the? house?