You are thinking of purchasing a house. The house costs 300000.You have 43000 in cash...

You are thinking of purchasing a house. The house costs 300000. You have 43000 in cash that you can use as a down payment on the house but you need to borrow the rest of the purchase price. The bank is offering a 30yr mortgage that requires annual payments and has an interest rate of 5 percent per year. What will be the annual payment?

Solutions

Expert Solution

The annual payment is computed as follows:

Present value = Annual payment x [ (1 – 1 / (1 + r)ⁿ) / r ]

300,000 - 43,000 = Annual payment x [ (1 - 1 / (1 + 0.05)³⁰ ) / 0.05 ]

257,000 = Annual payment x 15.37245103

Annual payment = 257,000 / 15.37245103

Annual payment = 16,718.22 Approximately

jeff jeffy answered 2 years ago

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