Question

Audrey Sanborn has just arranged to purchase a $540,000 vacation home in the Bahamas with a 30 percent down payment. The mortgage has a 6 percent APR, compounded monthly, and calls for equal monthly payments over the next 30 years. Her first payment will be due one month from now. However, the mortgage has an eight-year balloon payment, meaning that the balance of the loan must be paid off at the end of Year 8. There were no other transaction costs or finance charges.

  

How much will Audrey’s balloon payment be in eight years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

  

Balloon payment

$

Can this be shown on a BA 11 plus financial calulator

Answer 1

first we need to calculate monthly payment. so,

INPUT	30*12=360	6%/12=0.5%	0.70*$540000=$378000		0
TVM	N	I/Y	PV	PMT	FV
OUTPUT				-$2,266.30

Hence, monthly payment is $2,266.30

Now, we need to find the value of the mortgage after 8 years. We can calculate that by finding the present value of the mortgage at the end of 8 years, i.e. with 22 years(30-8) remaining. So,

INPUT	22*12=264	6%/12=0.5%		-$2,266.30	0
TVM	N	I/Y	PV	PMT	FV
OUTPUT			$331,779.50

Hence, Audrey’s balloon payment be in eight years = $331,779.50