Question

You want to buy a $202,000 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 5%?

$

c) What will your monthly payments be if the interest rate is 6%?

$

Answer 1

a.	Loan amount	=	Cost of house	-	Down Payment
		=	$       2,02,000	-	(202000*20%)
		=	$       2,02,000	-	$       40,400
		=	$       1,61,600
b.	Monthly Payment	=	Loan amount	/	Present value of annuity of 1
		=	$       1,61,600	/	186.273134
		=	$           867.54
	Working;
	Present value of annuity of 1	=	(1-(1+i)^-n)/i		Where,
		=	(1-(1+0.004167)^-360)/0.004167		i	=	5%/12	=	0.004167
		=	186.2731343		n	=	30*12	=	360
c.	Monthly Payment	=	Loan amount	/	Present value of annuity of 1
		=	$       1,61,600	/	166.791614
		=	$           968.87
	Working;
	Present value of annuity of 1	=	(1-(1+i)^-n)/i		Where,
		=	(1-(1+0.005)^-360)/0.005		i	=	6%/12	=	0.005
		=	166.7916144		n	=	30*12	=	360