Question

In: Finance

You want to buy a $201,000 home. You plan to pay 20% as a down payment,...

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%?

Expert Solution

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.

jeff jeffy answered 2 years ago

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