Question

1. You’d like to buy a house. You can borrow $600,000 but you can only afford to make monthly payments of $2,750. The lender agrees to allow you to make this payment on a 30 year mortgage, but then you must make a balloon payment to cover any shortfall. What is the dollar amount you’ll still owe if your mortgage rate is 4.349%

		$154,611
		$174,763
		$189,305
		$217,206

Answer 1

Ballon payment is calculated using the formula:

=PV*(1+r)^n-P((1+r)^n-1))/r

=(600000*(1+4.349%/12)^(30*12))-(2750*((1+4.349%/12)^(30*12)-1)/(4.349%/12))

=174,763

Where,

PV is present value

r is periodic rate

n is no of periods

P is payment per period