Question

Suppose a farm couple has the option to purchase 400 acres of land. Assume they are...

  1. Suppose a farm couple has the option to purchase 400 acres of land. Assume they are able to purchase the land for $4,000/acre. Assume a 25% down payment with the balance financed by a 30 year loan with a 7% interest rate and equal annual principal payments. What will their interest change in year 3 be?

    a.

    $40,000
    b.

    $81,200
    c.

    $78,400
    d.

    $84,000
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Answer #1
Total land 400 acres
Land price per unit 4000 per acres
Total land cost 1600000
75% Financed 1200000 Loan Amount
Principle payment 40000
Year Annual priciple Payment Interest(7%) on balance principle Balance amt
1 40000 840000 1160000
2 40000 812000 1120000
3 40000 784000 1080000

so correct answer is c 784000

Note: Incase of any doubt, please do comment. I will get back to you. Kindly post rest of the questions sapratly since as per policy I can not anwer more than 1 question. Thanks!!

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