Now you have decided that is time to buy a home, this is why you have been tryin
ID: 2410327 • Letter: N
Question
Now you have decided that is time to buy a home, this is why you have been trying to build your credit. Research a home that you would love to buy and state the purchase price and a (commonly advertised) interest rate for the mortgage (you may state a rate from a table). Also pick a down payment percent, either 10% i5% or 20%. You will need to open savings account to save for this down payment, find the amount you will need to deposit today into an account at 12% compounded quarterly to build the down payment in 5 years. Using the price of the home and your down payment as well as the finance rate, find the monthly payment of your 30 year mortgageExplanation / Answer
Let the total cost of the house be 1,000,000 and down payment requirement be 10% of the cost of the house.
Then the down payment requirement will be 1,000,000 X 10% = 100,000
This down payment amount of 100,000 is required after 5 years so a particular amount will be deposited in saving account today which is yielding 12% interest compounded quaterly.
Calculation of amount to be invested today for down payment:
Let the amount be A.
A X (1+.12*(3/12))^(4*5) = 100,000
On solving the above equation, we get:
A X 1.80611123 = 100,000
A = 55,367.5754
So, today a sum of 55,367.5754 is required to be deposited in a saving account fetching 12% interest compounded quaterly so that after 5 years, the fund value will be 100,000.
Total loan requirement = 1,000,000 - 100,000 = 900,000
Let the monthly payment be M
So, 12M X (1-(1.12^30))/11.4949379 = 9,00,000
On solving the above equation, we get M = 8.918.90
Calculation of 11.4949379:
(1+.12) = (1+(I*(3/12)))^(3/12)
On solving the above equation, we get I = 11.4949379
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.