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MY QUESTION IS ABOUT NUMBER 2 ONLY. Why do you use 8 years instead of...

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Accounting

MY QUESTION IS ABOUT NUMBER 2 ONLY.

Why do you use 8 years instead of 12?

Given the following the data: home loan amount 340,000 interest 4.6% loan term in years : 20 yrs 1)Calculate the monthly payment 2)Calculate the present value given 12 years 3) If the annual increase in home value is 7% yearly, calculate the value of the home at the time of the present value.

1). Monthly Payment : PMT = PV / [ { 1 - 1 / ( 1 + I/Y )^N } / I/Y ] = 340,000 / [ { 1 - 1 / ( 1 + 0.383% )^240 } / 0.383% ] = 2,169.40

2.) Present value after 12 years the PV of the payments that we will pay in next 8 years, therefore the values are as follows: PMT = 2,169.40 N = 8 * 12 = 96 I/Y = 4.6% / 12 = 0.383% FV = 0 PV = ( PMT / I/Y )* { 1 - 1 / ( 1 + I/Y )^N } = ( 2,169.40 / 0.383% )* { 1 - 1 / ( 1 + 0.383% )^96 } = $173,964.59

3.) if the value of the home increases by 7% every year and then we need to calculate the value of the home after 12 years that is the time we calculated the present value of the loan : Therefore, the value of the house = 340,000 * ( 1 + 7% ) ^ 12 = 765,745.14

NOTE: I get everything except number 2

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