Question

# You need a 20-year, fixed-rate mortgage to buy a new home for \$230,000. Your mortgage bank...

 You need a 20-year, fixed-rate mortgage to buy a new home for \$230,000. Your mortgage bank will lend you the money at a 8.1 percent APR for this 240-month loan. However, you can afford monthly payments of only \$850, so you offer to pay off any remaining loan balance at the end of the loan in the form of a single balloon payment.
 Required: How large will this balloon payment have to be for you to keep your monthly payments at \$850?

Multiple Choice

• \$629,497.93

• \$648,966.94

• \$674,925.61

• \$129,130.66

• \$114,603.69

Loan Amount = \$230,000

Monthly Payment you can afford = \$850

Monthly Interest rate = APR/12 = 8.1%/12 = 0.6750%

Calculating the balloon paymnet required at the end of the loan period using Excel "Future Value" function:-

So, Balloon Paymnet at the end of Loan period is \$648,966.94

Option 2

#### Earn Coins

Coins can be redeemed for fabulous gifts.