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8.Problem 4 and 5-7 House Appreciation and Mortgage Payments Say that you purchase a house for...

8.Problem 4 and 5-7 House Appreciation and Mortgage Payments

Say that you purchase a house for $260,000 by getting a mortgage for $230,000 and paying a $30,000 down payment. If you get a 30-year mortgage with a 6 percent interest rate, what are the monthly payments? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

PMT $

What would the loan balance be in ten years? (Round the payment amount to the nearest cent but do not round any other interim calculations. Round your final answer to 2 decimal places.)

PVA $

If the house appreciates at 2 percent per year, what will be the value of the house in ten years? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

FV $

How much of this value is your equity? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Equity $

11.Problem 4 and 5-6 Present Value and Annuity Payments

A local furniture store is advertising a deal in which you buy a $5,700 living room set with three years before you need to make any payments (no interest cost is incurred).

How much money would you have to deposit now in a savings account earning 6 percent APR, compounded monthly, to pay the $5,700 bill in three years? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Present value $

How much would you have to deposit in the savings account each month to be able to pay the bill? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Annuity payment $

14.Problem 5-32 Compound Frequency (LG7)

Payday loans are very short-term loans that charge very high interest rates. You can borrow $300 today and repay $369 in two weeks. What is the compounded annual rate implied by this 23 percent rate charged for only two weeks? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Compounded annual rate %

Expert Solution

8.

Value of home = $260,000

Down Payment = $30,000

Mortgage loan = $230,000

Monthly payment on mortgage loan is calculated in excel and screen shot provided below:

Monthly payment on mortgage loan is $1,378.97.

b.

Outstanding balance of loan after 10 year will present value of next 20 year monthly payment. So, outstanding balance of loan after 10 year is calculated in excel and screen shot provided below:

Outstanding balance of loan after 10 year will be $192,477.17.

c.

Growth rate in value of home = 2%

Value of home after 10 year = $260,000 × (1 + 2%) ^ 10

= $260,000 × 1.21899

= $316,938.55

Value of home after 10 year will be $316,938.55.

d.

Value of equity after 10 year = Value of home after 10 year - outstanding balance after 10 year

= $316,938.55 - $192,477.17

= $124,461.38.

Value of equity after 10 year will be $124,461.38.

jeff jeffy answered 2 years ago

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