You need a 25-year, fixed-rate mortgage to buy a new home for $210,000. Your mortgage bank...

You need a 25-year, fixed-rate mortgage to buy a new home for $210,000. Your mortgage bank will lend you the money at a 7.6 percent APR for this 300-month loan. However, you can afford monthly payments of only $850, so you offer to pay off any remaining loan balance at the end of the loan in the form of a single balloon payment.

How large will this balloon payment have to be for you to keep your monthly payments at $850?

Multiple Choice

$618,766.95

$95,983.79

$663,420.23

$637,904.07

$76,490.22

Solutions

Expert Solution

Present value of monthly payment:

Present value is $114,016.2131.

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Difference = $210,000 - $114,016.2131

Difference = $95,983.7869

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Balloon payment:

Balloon payment is $637,904.07.

jeff jeffy answered 4 weeks ago

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