Question

11. Suppose you want to buy a house. The house costs $180,000. You plan to make...

11. Suppose you want to buy a house. The house costs $180,000. You plan to make a cash down payment of 15 percent and finance the balance over 20 years at 7 percent. What will be the amount of your monthly payment?

Homework Answers

Answer #1
Cost of hosue is $ 180,000/.
Down payment is = (180000*15%)
Down payment is = $ 27,000/.
Balance of cost of house payable in monthly installments = (180000-27000)
Balance of cost of house payable in monthly installments = $ 153,000/.
Monthly payments can be found using present value of annuity formula
Present value of annuity is = P*(1-(1+r)^-n)/r
Present value of annuity is = $ 153,000/.
"P" is Monthly payment =?
"r" is Monthly interest rate = (7%/12) = 0.5833%
"n" is No of months = 20*12 = 240
153000=P*(1-(1+0.005833)^-240)/0.005833
153000=P*129.986501
P is = (153000/129.986501)
P is = $ 1,177.05/.
Monthly payments are $ 1.177.05/. Approx.
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