(a)What is the amount being financed?
Amount to be Financed = Price * (1 - Down Payment) = 986000 * 0.90 = $887400
(b) If Darrell chooses the 4-point 9% loan, what will be his total outlay in points and payments after 48 months?
Monthly Payment = Loan / PVAF(0.09/12,360)
Monthly Payment = $887400 / 124.28 = $7140.22
total outlay = Monthly Payment * 48 M + Points
total outlay = 7140.22 * 48 M + 887400 * 0.04
total outlay = $378226.61
(c) If Darrell chooses the 3-point 9.25% loan, what will be his total outlay in points and payments after 48 months?
Monthly Payment = Loan / PVAF(0.0925/12,360)
Monthly Payment = $887400 / 121.55 = $7300.42
total outlay = Monthly Payment * 48 M + Points
total outlay = 7300.42 * 48 M + 887400 * 0.03
total outlay = $377042.24
(d) If Darrell chooses the 2-point 9.5% loan, what will be his total outlay in points and payments after 48 months?
Monthly Payment = Loan / PVAF(0.095/12,360)
Monthly Payment = $887400 / 118.93 = $7461.74
total outlay = Monthly Payment * 48 M + Points
total outlay = 7461.74 * 48 M + 887400 * 0.02
total outlay = $375911.53
(e) Of the three choices for a loan, which results in the lowest total outlay for Darrell after 48 months?
the 2-point 9.5% loan (Because it has lowest total outlay)
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