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Find the monthly payment for a 289,500.00 home with 20% down payment. The terms of the mortgage are 8.5% for 25 years. Note:Find the down payment and use a 'Monthly Payment of Mortgage' table. Extra: Find the monthly payment for that home for any combination of terms: 8.5% & 9.5%, 20 & 25 years, 20% & 25% down payment. Compare with given.

Find the monthly payment for a 289,500.00 home with 20% down payment. The terms of the mortgage are 8.5% for 25 years. Note:Find the down payment and use a 'Monthly Payment of Mortgage' table. Extra: Find the monthly payment for that home for any combination of terms: 8.5% & 9.5%, 20 & 25 years, 20% & 25% down payment. Compare with given.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Find the monthly payment for a 289,500.00 home with 20% down payment. The terms of the mortgage are 8.5% for 25 years. Note:Find the down payment and use a 'Monthly Payment of Mortgage' table. 8 Extra: Find the monthly payment for that home for any combination of terms: 8.5% & 9.5%, 20 & 25 years, 20% & 25% down payment. Compare with given.
Transcribed Image Text:Find the monthly payment for a 289,500.00 home with 20% down payment. The terms of the mortgage are 8.5% for 25 years. Note:Find the down payment and use a 'Monthly Payment of Mortgage' table. 8 Extra: Find the monthly payment for that home for any combination of terms: 8.5% & 9.5%, 20 & 25 years, 20% & 25% down payment. Compare with given.
Expert Solution
Step 1

The cost of home = 289,500

The down payment = 20% 

Interest rate on mortgage = 8.5% 

The time period of mortgage = 25 Years 

Step 2

The down payment will be

= Cost of home × 20%= 289,500 × 20%= 57,900

The amount of mortgage will be:

= Cost of home - Down payment= 289,500 - 57,900=231,600

Step 3

 

Monthly interest rate

 = Interest Rate12= 8.5%12= 0.7083%

The time duration will be:

= Time period ×12= 25 years × 12= 300

Step 4

The monthly payment will be

= Loan amount × rate×(1+rate)^n(1+rate)^n-1= 231,600 × 0.007083×(1+0.007083)^300(1+0.007083)^300 - 1= 231,600 ×0.0588626557.309587873=1,865.028

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