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
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