Question

In: Finance

You borrow $20,000 from your parents to make a house down payment at a mutually agreedupon...

You borrow $20,000 from your parents to make a house down payment at a mutually agreedupon annual interest rate of 5%, and a payback period of 5 years (direct reduction loan). What will be your annual, or monthly, payment amounts?

Solutions

Expert Solution

This problem can be solved using the Present value of Future Annuity
Present value of annuity is = P*(1-(1+r)^-n/r)
Present value of Future annuity is = loan borrowed = $ 20,000 /-
r is Rate of Interest = 5%
n is no of years = 5
P is Annual Payment = ?
20000=P*(1-(1+0.05)^-5/0.05)
20000=P*4.329476671
P is Annual Payment = $ 4,619.50 /- Approx.
If repayment is made monthly :-
Present value of annuity is = P*(1-(1+r)^-n/r)
Present value of Future annuity is = loan borrowed = $ 20,000 /-
r is Rate of Interest = 0.42%
n is no of years = 60 months
P is Monthly Payment = ?
20000=P*(1-(1+0.004167)^-60/0.004167)
20000=P*52.99
P is Monthly Payment = $ 377.40 /- Approx.

Related Solutions

You borrow $50,000 from your parents. The terms of the loan are that you will make...
You borrow $50,000 from your parents. The terms of the loan are that you will make equal payments back to your parents at the end of each of the next 4 years. If the interest rate on the loan is 3% calculate 1) the amount of each payment 2) the amount that you will pay in interest for the four years (total amount of interest). Verify your results by constructing an amortization table. 3) Calculate the payment if instead of...
if you are buying a house valued at $210,000 with 10% down payment. You will borrow...
if you are buying a house valued at $210,000 with 10% down payment. You will borrow the remaininf 90% of the purchase prices at 6% APR and the loan will be paid off in 30 years, how much do you still owe two months from now?
You are thinking of purchasing a house that costs $230,000. You have $20,000 in cash for a down payment, but you need to borrow the rest of the purchase price.
  You are thinking of purchasing a house that costs $230,000. You have $20,000 in cash for a down payment, but you need to borrow the rest of the purchase price. The bank is offering a 30-year mortgage that requires monthly payments and has an annual interest rate of 4.55%. What will your monthly payments be if you sign up for this mortgage? Create the amortization schedule on a monthly basis using Excel. Calculate the total amount of interest paid...
​You just bought a house for $300,000. You put $100,000 as a down payment and borrow the remaining $200,000 from a bank.
You just bought a house for $300,000. You put $100,000 as a down payment and borrow the remaining $200,000 from a bank. You take out a 30-year mortgage that charges you 6 percent APR but with monthly compounding.              A. (15 points) How much is your monthly mortgage payment? Show your work.              B. (5 points) How much of your second mortgage payment goes towards interest? Show your work.
You purchase a town house for $250,000. Since you are able to make a down payment...
You purchase a town house for $250,000. Since you are able to make a down payment of 20 percent ($50,000), you are able to obtain a $200,000 mortgage loan for 20 years at a 5 percent annual rate of interest. a. What are the annual payments that cover the interest and principal repayment? b. How much of the first payment goes to cover the interest? c. How much of the loan is paid off during the first year? d. What...
Your friend purchases a $165,000 house. He is able to make a 20% down payment. The...
Your friend purchases a $165,000 house. He is able to make a 20% down payment. The bank will give him a 30-year loan with a 4% APR. How much interest will your friend pay over 30 years to his loan? (round to the nearest cent)
The Turners have purchased a house for $200,000. They made an initial down payment of $20,000...
The Turners have purchased a house for $200,000. They made an initial down payment of $20,000 and secured a mortgage with interest charged at a rate of 6.2%/year, compounded monthly, on the unpaid balance. Assume the loan is amortized over 25 years. (a) What monthly payment will the Turners be required to make? (b) What will be their total interest paid over the 25 years? (c) What will be their equity disregarding depreciation after 5 years?
You are buying your first condo for $220,000 and are making a $20,000 down payment. You...
You are buying your first condo for $220,000 and are making a $20,000 down payment. You have arranged to finance the remaining amount with a 30-year monthly payment amortized mortgage at a 5.75% nominal interest rate. What will your monthly payments be? a.   $1,167.15 b.   $1,900.88 c.   $1,200.93 d.   $1,962.70 e.   $1,324.02 f.    $2,100.04 What is the estimated payoff on the mortgage question above after you have paid for 10 years? Show how you obtained the mortgage balance using Excel...
1. Suppose you wish to buy a house for $500,000. You make a 25% down payment...
1. Suppose you wish to buy a house for $500,000. You make a 25% down payment and borrow the rest at an interest rate of 6% for 30 years. (a) What is your annual repayment? (b) Repeat the above assuming a mortgage term of 25 years. 2. Suppose you borrow $20,000 to buy a car. The interest rate is 11% and the loan is for 8 years. (a) What is your annual repayment? (b) What is the remaining balance after...
1. Suppose you wish to buy a house for $500,000. You make a 25% down payment...
1. Suppose you wish to buy a house for $500,000. You make a 25% down payment and borrow the rest at an interest rate of 6% for 30 years. (a) What is your annual repayment? (b) Repeat the above assuming a mortgage term of 25 years. 2. Suppose you borrow $20,000 to buy a car. The interest rate is 11% and the loan is for 8 years. (a) What is your annual repayment? (b) What is the remaining balance after...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT