Question

1. Bank of America offers you a 30-year, fixed-rate mortgage with 80% LTV, an annual interest rate of 4.25%, and mortgage payments of $2,312. Home value is 550,000. What is the down payment on this loan?

Answer 1

PVOrdinary Annuity = C*[(1-(1+i/(f*100))^(-n*f))/(i/(f*100))]

C = Cash flow per period

i = interest rate

n = number of payments I f = frequency of payment

PV= 2312*((1-(1+ 4.25/1200)^(-30*12))/(4.25/1200))

PV = 469976.12

Using Calculator: press buttons "2ND"+"FV" then assign

PMT =2312

I/Y =4.25/12

N =30*12

FV = 0

CPT PV

Using Excel

=PV(rate,nper,pmt,FV,type)

=PV(4.25/(12*100),12*30,,PV,)

Downpayment = PV/LTV-PV = 469976.12/0.8-469976.12

=

117494.03