Question

1.Suppose you want to buy a car that costs $19,000. If the dealer is offering 100% financing at 6.2% APR for a 5 year loan, what would be the monthly payment? (Answer to the nearest penny)

2.Suppose you want to buy a house that costs $850,000. You are required to put 10% down, which means the amount to be borrowed is 90% of the price of the house. If you want a 30 year mortgage, and the borrowing rate is 5.3% APR, what would be your monthly payment? (Answer to the nearest penny)

Answer 1

a.Information provided:

Price of the car= mortgage= $19,000

Time= 5 years*12= 60 months

Interest rate= 6.2%/12= 0.5167

The monthly payment is calculated by entering the below in a financial calculator:

PV= -19,000

N= 60

I/Y= 0.5167

The value obtained is 369.09.

Therefore, the monthly payment is $369.09.

b.Information provided:

Price of the house= $850,000

Down payment= 0.10*$850,000= $85,000

Mortgage= $850,000 - $85,000= 765,000

Time= 30 years*12= 360 months

Interest rate= 5.3%/12= 0.4417%

The monthly payment is calculated by entering the below in a financial calculator:

PV= -765,000

N= 360

I/Y= 0.4417

The value obtained is 4,248.09.

Therefore, the monthly payment is $4,248.09.

In case of any query, kindly comment on the solution.