please answer in excel
PART 1
You are planning to purchase a house that costs $420,000. Youplan to put some money down and borrow the remainder with a 30-yearmortgage.
- Based on your credit score, you believe that you will pay 3.50%interest if you put 20% down. Use function “PMT” to calculate yourmortgage payment.
- Based on your credit score, you believe that you will pay 3.50%interest. Use function “PV” to calculate the loan amount given apayment of $1,500 per month. What is the most that you canborrow?
- Use function “RATE” to calculate the interest rate given amonthly payment of $1,500 and a loan amount of $336,000.
- For each scenario, calculate the total amount of money you willpay. (Down payment plus principle (loan amount) plus interest, or,down payment plus monthly payment times number of payments).Suppose in case 2, you borrow the most that you can borrow, and putdown the rest to buy the house.
- For each scenario, calculate the total interest that you willhave paid once the mortgage is paid off. (There is not a functionfor this, enter the formula into the cell.)
- Assume that you plan to pay an extra $300 per month on top ofyour $1,500 monthly payment, use function “NPER” to calculate howlong it will take you to pay off the $336,000 loan given the higherpayment. Assume under this scenario you will pay 3.50% interest.(This should be different from 30 years). Calculate how muchinterest you will pay in total. Compare this to the value that youcalculated for #1.
PART 2
You want to determine whether or not you should save some ofyour money and put only 10% down on your house. Because you areonly putting 10% down, lenders require that you purchase privatemortgage insurance (PMI). Assume that annual cost of PMI is 0.8% ofthe mortgage loan amount that you borrow today. Assume that youwill pay PMI for 8 years before you are eligible to waive it.
- Calculate your total monthly payment for the first 8 years(mortgage payment plus PMI) and the rest 22 years (only mortgagepayment).
Monthly cost for PMI = annual cost ofPMI/12
- Calculate the total amount of money you will pay. (Down paymentplus principle (loan amount) plus interest plus PMI.)
- Calculate the total cost of financing of your home purchase(interest plus PMI).
- Compare this to the total amount of money you will payassociated with a 20% down payment (use data from #1).
