Question

In: Finance

(Annuity payments) Mr. Bill S.​ Preston, Esq., purchased a new house for ​$100,000. He paid ​$15,000...

(Annuity payments) Mr. Bill S.​ Preston, Esq., purchased a new house for ​$100,000. He paid ​$15,000 upfront and agreed to pay the rest over the next 25 years in 25 equal annual payments that include principal payments plus 8 percent compound interest on the unpaid balance.

What will these equal payments​ be?

Mr. Bill S.​ Preston, Esq., purchased a new house for ​$100,000 and paid $15,000 upfront. How much does he need to borrow to purchase the​ house?

Solutions

Expert Solution

Amount borrowed = price of house-upfront payment = 100000-15000=85000

Annual rate(M)= yearly rate/12= 8.00% Annual payment= 7962.70
Year Beginning balance (A) Annual payment Interest = M*A Principal paid Ending balance
1 85000.00 7962.70 6800.00 1162.70 83837.30
2 83837.30 7962.70 6706.98 1255.71 82581.59
3 82581.59 7962.70 6606.53 1356.17 81225.42
4 81225.42 7962.70 6498.03 1464.66 79760.76
5 79760.76 7962.70 6380.86 1581.84 78178.93
6 78178.93 7962.70 6254.31 1708.38 76470.54
7 76470.54 7962.70 6117.64 1845.05 74625.49
8 74625.49 7962.70 5970.04 1992.66 72632.83
9 72632.83 7962.70 5810.63 2152.07 70480.76
10 70480.76 7962.70 5638.46 2324.24 68156.53
11 68156.53 7962.70 5452.52 2510.17 65646.35
12 65646.35 7962.70 5251.71 2710.99 62935.37
13 62935.37 7962.70 5034.83 2927.87 60007.50
14 60007.50 7962.70 4800.60 3162.10 56845.40
15 56845.40 7962.70 4547.63 3415.06 53430.34
16 53430.34 7962.70 4274.43 3688.27 49742.07
17 49742.07 7962.70 3979.37 3983.33 45758.74
18 45758.74 7962.70 3660.70 4302.00 41456.74
19 41456.74 7962.70 3316.54 4646.16 36810.59
20 36810.59 7962.70 2944.85 5017.85 31792.74
21 31792.74 7962.70 2543.42 5419.28 26373.46
22 26373.46 7962.70 2109.88 5852.82 20520.64
23 20520.64 7962.70 1641.65 6321.04 14199.60
24 14199.60 7962.70 1135.97 6826.73 7372.87
25 7372.87 7962.70 589.83 7372.87 0.00
Where
Interest paid = Beginning balance * Annual interest rate
Principal = Annual payment – interest paid
Ending balance = beginning balance – principal paid
Beginning balance = previous Year ending balance

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

Mr. Bill S.​ Preston, Esq., purchased a new house for ​$120,000. He paid $30,000 upfront and...
Mr. Bill S.​ Preston, Esq., purchased a new house for ​$120,000. He paid $30,000 upfront and agreed to pay the rest over the next 10 years in 10 equal annual payments that include principal payments plus 8 percent compound interest on the unpaid balance. What will these equal payments​ be? a.  Mr. Bill S.​ Preston, Esq., purchased a new house for ​$120,000 and paid ​$30,000 upfront. How much does he need to borrow to purchase the​ house?
financial management principles. . Bill S.Preston purchased a new house for $100,000. He paid $20,000 upfront...
financial management principles. . Bill S.Preston purchased a new house for $100,000. He paid $20,000 upfront on the down payment and agreed to pay the rest over the 25 years in 25 equal annual payments that include principal payments plus 8 percent compound interest on the unpaid balance. What will these equal payments be? What is the present value of an annuity of $90 received at the beginning of each year for the next six years? The first payment will...
(1) Emily Morrison purchased a new house for ​$100,000. She paid ​$40,000 upfront and agreed to...
(1) Emily Morrison purchased a new house for ​$100,000. She paid ​$40,000 upfront and agreed to pay the rest over the next 20 years in 20 equal annual payments that include principal payments plus 9 percent compound interest on the unpaid balance. What will these equal payments​ be? a.  Emily Morrison purchased a new house for ​$100,000 and paid ​$40,000 upfront. How much does she need to borrow to purchase the​ house​(Round to the nearest​ dollar.) (2) To pay for...
John purchased a new house for $500,000. He paid 20 percent down and agreed to pay...
John purchased a new house for $500,000. He paid 20 percent down and agreed to pay the rest over the next 25 years in 25 equal annual payments at 6 percent compound interest. What will be his annual payments?
Christina purchased an annuity from an insurance company. Christina paid $156,300 for the annuity, and in...
Christina purchased an annuity from an insurance company. Christina paid $156,300 for the annuity, and in exchange she will receive $20,100 per year for the next 10 years. How much of the first $20,100 payment should Christina exclude from gross income?_________ Please explain how you got each number in your solution and/or where the number comes from.
James moved to a new house so he rented his old home to Mr. Parker for...
James moved to a new house so he rented his old home to Mr. Parker for two years. Later the old house caught fire and had a $100,000 loss. The old house was valued at $400,000 and James had a $300,000 homeowner's insurance policy with an 80% coinsurance. How much will insurance company pay for his loss?
Preston, Alex and George recently purchased a house together, and each person bought their own insurance...
Preston, Alex and George recently purchased a house together, and each person bought their own insurance policy on the house. Preston bought $200,000 of coverage, Alex bought $200,000 of coverage, and George bought $100,000 of coverage. The day after they purchased their insurance policies, George’s electric guitar stereo shorted out and started a fire. The resulting damage totaled $40,000.   How much of the loss did George's insurance company pay, assuming that all three policies contained pro?rata clauses? 16,000 24,000 40,000...
Monthly payments of ?$75 are paid into an annuity beginning on January? 31, with a yearly...
Monthly payments of ?$75 are paid into an annuity beginning on January? 31, with a yearly interest rate of 12?%, compounded monthly. Add the future values of each payment to calculate the total value of the annuity on September 1. On September? 1, the value of the annuity will be: ?(Round to the nearest? cent.)
VV purchased a house in New Hampshire 20 years ago for $30,000. When he died, an...
VV purchased a house in New Hampshire 20 years ago for $30,000. When he died, an appraisal report showed that the house had a fair market value of $650,000. The house went to his Nephew Tom. In a like-kind exchange, Tom exchanged the house with Jerry. Jerry’s house at the time of the exchange had a fair market value of $450,000 and an adjusted basis of $325,000 What is the reason why there is a boot in this exchange? Grandpa...
Emily Morrison purchased a new house for $190,000 and paid $40,000 upfront. How much does she need to borrow to purchase the house?
(Annuity payments)  Emily Morrison purchased a new house for $190,000. She paid $40,000 upfront and agreed to pay the rest over the next 10 years in 10 equal annual payments that include principal payments plus 12 percent compound interest on the unpaid balance. What will these equal payments be?a.  Emily Morrison purchased a new house for $190,000 and paid $40,000 upfront. How much does she need to borrow to purchase the house?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT