Question

In: Finance

You are thinking of purchasing a house. The house costs $200,000. You have $29,000 in cash...

You are thinking of purchasing a house. The house costs $200,000. You have $29,000 in cash that you can use as a down payment on the​ house, but you need to borrow the rest of the purchase price. The bank is offering a 30​-year mortgage that requires annual payments and has an interest rate of 7% per year. What will be your annual payment if you sign this​ mortgage?

Solutions

Expert Solution

Annual payment [P×r×(1+r)^n]÷[(1+r)^n-1]
Here,
1 Interest rate per annum 7.00%
2 Number of years                                                                                   30
3 Number of compoundings per per annum                                                                                     1
1÷3 Interest rate per period ( r) 7.00%
2×3 Number of periods (n) 30
Loan amount (P) $                                                                    171,000 =200000-29000
Annual payment $                            13,780.28
(171000×7%×(1+7%)^30)÷((1+7%)^30-1)

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