Question

You are seeking a fixed-rate mortgage of $750,000 with a term of 30 years. Your bank quotes

an APR of 12.0 percent, compounded monthly. You can only afford monthly payments of

$7,500, so you offer to pay off any remaining loan balance at the end of the loan term in the

form of a single balloon payment. What will be the amount of the balloon payment? NOTE:

The balloon payment will include the last payment of $7,500.

Answer 1

Future value (FV) calculated using FV function of Excel is the loan amount itself ie $750,000.

Balloon payment required at the end of 30 years= FV + Last monthly payment

=$750,000 + $7,500 = $757,500

Calculation of FV as follows: