(Related to Checkpoint 6.1) (Annuity payments) Mr. Bill S. Preston, Esq., purcha

Question

(Related to Checkpoint 6.1) (Annuity payments) Mr. Bill S. Preston, Esq., purchased a new house for $140,000. He paid $25,000 upfront and agreed to pay the rest over the next 20 years in 20 equal annual payments that include principal payments plus 9 percent compound interest on the unpaid balance. What will these equal payments be? a. Mr. Bill S. Preston, Esq., purchased a new house for $140,000 and paid $25,000 upfront. How much does he need to borrow to purchase the house? (Round to the nearest dollar.)

Explanation / Answer

Value of the House 1,40,000 Upfront payment 25000 Loan Value 1,15,000 *This is the amount he will have the borrow from the Bank rate 9% Loan Term 20 years Let's calculate the yearly payment he has to make 12,597.84 *please note, I have used the Excel Function PMT to calculate the yearly payment, you can use the Financial Calculator to get the same answer.

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