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