Mr. Bill. S. Preston, Esq., purchased a new house for $150,000. He paid $25,000

Q: Mr. Bill. S. Preston, Esq., purchased a new house for $150,000. He paid $25,000

A) He needs to borrow $125,000. ($150,000-$25,000) B) Annual payment = [P×r×(1+r)^n]÷[(1+r)^n-1] P is Principal payable r is interest rate n is number of payments = [$125,000×14%×(1+14%)^10]÷[(1+14%)^10-1] = $23,964.2

ID: 2709810 • Letter: M

Question

Mr. Bill. S. Preston, Esq., purchased a new house for $150,000. He paid $25,000 upfront and agreed to pay the rest over the next 10 years in 10 equal annual payments that include principal payments plus 14 percent compound interest on the unpaid balance. What will these equal payments be?

A) Mr. Bill. S. Preston, Esp., purchased a new house for $150,000 and paid $25,000 upfront. How much does he need to borrow to purchase the house?

B) If Bill agrees to pay the loan over the next 10 years in 10 equal end-of-year- payments plus 14 percent compound interest on the unpaid balance, what will these equal payments be?

Explanation / Answer

He needs to borrow $125,000. ($150,000-$25,000)

Annual payment = [P×r×(1+r)^n]÷[(1+r)^n-1]

P is Principal payable

r is interest rate

n is number of payments

= [$125,000×14%×(1+14%)^10]÷[(1+14%)^10-1]

= $23,964.2

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Mr. Bill. S. Preston, Esq., purchased a new house for $150,000. He paid $25,000

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