Question

1. After working for a few years with your UCF finance degree, you're ready to buy a $450,000 house. Suppose you pay 20% as a down payment, and you finance the rest for 30 years at 6.5%. What is the amount of your monthly payment?

2. After working for a few years with your UCF finance degree, you're ready to buy a $450,000 house. Suppose you pay 20% as a down payment, and you finance the rest for 30 years at 6.0%. What is the balance on your mortgage after you have paid your 200th payment?

3. If you borrow $30,000 from a local finance company and you are required to pay $711 per month for 4 years, what is the annual interest rate on the loan?

Answer 1

1) monthly payment is    = $ 2275.44

given,

Principal loan P    =   360000     ( 450000 - 20%of 450000)   since 20% down payment

rate                  r       = 6.5% p.a or   0.5416667% per month (6.5/12) or 0.005416667

no. of periods    n      =    360   ( 30years X 12 months)

the equated monthly mortgge payments is given by the formula,

                      

                      

                      

                        = $ 2275.44

2)    Mortgage balance after 200th payment = =      $237,324.65

given,

Principal loan    P    =   360000     ( 450000 - 20%of 450000)   since 20% down payment

rate                     r       = 6.0% p.a or   0.50% per month(6.5/12) or 0.005

no. of periods      n      =    360   ( 30years X 12 months)

no. of periods paid m   = 200

mortgage outstanding after m number of payments is

                                  

substituting,

                                   

                                    =      $237,324.65

3) rate of interest is =    6.47%

for computation of interest rate- we use the rate function in excel as shown below

the above rate is per month rate, so annual rate is 6.467573% (0.538964*12)

                                                        =    6.47%

the excel formula used is

1