In: Finance
You want to buy a $201,000 home. You plan to pay 20% as a down payment, and take out a 30 year loan for the rest.
a) How much is the loan amount going to be?
b) What will your monthly payments be if the interest rate is
6%?
c) What will your monthly payments be if the interest rate is
7%?
a.Information provided:
Price of the house = $201,000
Down payment = 20%*$201,000 = $40,200
Therefore, loan amount = $201,000 - $40,200 = $160,800.
b.Information provided:
Loan = Present value = $160,800
Time= 30 years*12= 360 months
Interest rate= 6%/12= 0.50% per month
The monthly loan payment is calculated with the help of a BA Plus II Texas Instruments financial calculator by entering the below:
PV= -160,800
N= 360
I/Y= 0.50
Press the CPT key and PMT to compute the monthly payment.
The value obtained is 964.08.
Therefore, the monthly loan payment is $964.08.
c.Information provided:
Loan = Present value = $160,800
Time= 30 years*12= 360 months
Interest rate= 7%/12= 0.5833% per month
The monthly loan payment is calculated with the help of a BA Plus II Texas Instruments financial calculator by entering the below:
PV= -160,800
N= 360
I/Y= 0.5833
Press the CPT key and PMT to compute the monthly payment.
The value obtained is 1,069.81.
Therefore, the monthly loan payment is $1,069.81.