Explanation Given: Price of the home is $120,000 and the bank requires 10% down payment and 2 points at closing time, the cost gets financed for the time period of 30-year fixed rate mortgage at 8.5%. Formula Used: Calculation of monthly payments can be done with the mentioned formula: P M T = P ( r n ) [ 1 − ( 1 + r n ) − n t ] where PMT denotes the monthly payments, P denotes the Principal amount, R denotes the rate of interest, t denotes the number of years and n denotes the number of times compounding is done in a year. Calculation: Value of P can be computed by deducting the down payment from the price of the home. Price of the home is $120,000, whereas the down payment of the home is $12,000 ( $ 120 , 000 × 10 % ) . Thus, the value of P comes out to be $ 108 , 000 ( $ 120 , 000 − $ 12 , 000 ) . Compute the monthly payments by substituting the values in the formula as mentioned below: P M T = P ( r n ) [ 1 − ( 1 + r n ) − n t ] = $ 108 , 000 ( 0

7th Edition

ISBN: 9781323865040

Author: Blitzer

Publisher: PEARSON

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Chapter 8, Problem 24T

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To calculate: The total cost of interest.

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Chapter 8, Problem 23T

Chapter 8, Problem 25T

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