Question

# You are considering to buy a house. The current value of the house is \$550,000 and...

You are considering to buy a house. The current value of the house is \$550,000 and the 30-year mortgage rate based on your FICO score is 4.15%. You also decided to buy the house with a \$50,000 down payment, What are the repayment of principal and remaining balance in a month 3 respectively?

a. \$701 and \$499,299

b. \$704 and \$498,595

c. \$706 and \$497,889

d. \$704 and \$499,299

Loan Amount = PV = \$550,000 - \$50,000 = \$500,000

n = 30*12 = 360 months

r = monthly interest rate = 4.15%/12 = 0.345833333%

Monthly loan payment = [r*PV] /[1 - (1+r)^-n]

= [0.345833333%*\$500,000] / [1 - (1+0.345833333%)^-360]

= \$1,729.16667 / 0.711439625

= \$2,430.5178

Monthly loan payment is \$2,430.52

 Loan Repayment Schedule Month Opening Balance Payment Interest portion Principal Portion Closing Balance A B C D = B*4.5%/12 E = C-D F = B-E 1 500000 2430.52 1729.166667 701.3533 499298.6 2 499298.6 2430.52 1726.741153 703.7788 498594.9 3 498594.9 2430.52 1724.307251 706.2127 497888.7

Therefore, repayment of principal and remaining balancee in momth 3 is respectively is \$706 and \$497,889

Option c is correct

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