Question

You just found the house of your dreams. The price of the house is $200,000. You have been qualified to get a mortgage loan with AAA Bank. The mortgage loan is for 30 years at an annual interest rate of 12%z

Part (A):

How much are your monthly payments for the loan?

Part (B):

What is the balance of the mortgage loan after 3 years of payments?

Part (C):

After 3 years of payments, you want to add extra money to the monthly payments so that you will be able to pay off the mortgage loan in 15 years. How much do you have to add to your previously computed monthly payments in order to accomplish this?

Components to arrive to the answer to part (A):

How many periods (the value of n) do we need to to use in computing the monthly payments (PMT)?

What is the rate per period to use in solving the monthly payments for the mortgage loan?

How much is the monthly payment for the mortgage loan?

Components to arrive to the answer to part (B):

To compute the balance of the mortgage loan after three years, what is the value of n (number of periods) to use?

After three years, what is the balance of the mortgage loan?

Components to arrive to the answer to part (C):

These calculations are after you've made payments for three years. What is the value of N in the calculations of the new monthly payments?

How much are the new monthly payments (in order to pay off the loan in 15 years?

After three years of payments, do you want to add extra money to the monthly payment so that you will be able to pay off the mortgage loan in 15 years. How much do you have to add to your previously computed monthly payments in order to accomplish this?

Answer 1