You want to buy a $232,000 home. You plan to pay 10% as a down payment, and take out a 30 year loan for the rest. a) How much is the loan amount going to be? tA b) What will your monthly payments be if the interest rate is 5%? LA c) What will your monthly payments be if the interest rate is 6%? tA
You want to buy a $232,000 home. You plan to pay 10% as a down payment, and take out a 30 year loan for the rest. a) How much is the loan amount going to be? tA b) What will your monthly payments be if the interest rate is 5%? LA c) What will your monthly payments be if the interest rate is 6%? tA
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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![**Buying a Home: Loan and Payment Calculation**
You are considering purchasing a home valued at $232,000. You plan to make a down payment of 10% and secure a 30-year loan for the remaining amount.
**a) Loan Amount Calculation**
- Calculate the loan amount after the down payment.
\[ \text{Loan Amount} = \$232,000 \times (1 - 0.10) \]
\[ \text{Loan Amount} = \$232,000 - \$23,200 \]
\[ \text{Loan Amount} = \$208,800 \]
**b) Monthly Payment Calculation at a 5% Interest Rate**
- Determine your monthly payments if the interest rate is 5%.
Use the formula for a fixed-rate mortgage:
\[ M = P \frac{r(1+r)^n}{(1+r)^n-1} \]
Where:
- \( M \) is the total monthly mortgage payment.
- \( P \) is the loan principal (\$208,800).
- \( r \) is the monthly interest rate (annual rate/12).
- \( n \) is the number of payments (loan term in years \(\times 12\)).
**c) Monthly Payment Calculation at a 6% Interest Rate**
- Determine your monthly payments if the interest rate is 6%.
Use the same formula with the adjusted interest rate.
This exercise helps in understanding the impact of interest rates on monthly mortgage payments.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F79b24956-5ec9-4c53-911d-9c67a7f313db%2F4bf492cf-39f8-4750-83cd-f059f96b4ff4%2F3hz50us_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Buying a Home: Loan and Payment Calculation**
You are considering purchasing a home valued at $232,000. You plan to make a down payment of 10% and secure a 30-year loan for the remaining amount.
**a) Loan Amount Calculation**
- Calculate the loan amount after the down payment.
\[ \text{Loan Amount} = \$232,000 \times (1 - 0.10) \]
\[ \text{Loan Amount} = \$232,000 - \$23,200 \]
\[ \text{Loan Amount} = \$208,800 \]
**b) Monthly Payment Calculation at a 5% Interest Rate**
- Determine your monthly payments if the interest rate is 5%.
Use the formula for a fixed-rate mortgage:
\[ M = P \frac{r(1+r)^n}{(1+r)^n-1} \]
Where:
- \( M \) is the total monthly mortgage payment.
- \( P \) is the loan principal (\$208,800).
- \( r \) is the monthly interest rate (annual rate/12).
- \( n \) is the number of payments (loan term in years \(\times 12\)).
**c) Monthly Payment Calculation at a 6% Interest Rate**
- Determine your monthly payments if the interest rate is 6%.
Use the same formula with the adjusted interest rate.
This exercise helps in understanding the impact of interest rates on monthly mortgage payments.
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